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Oil Rises From More Than Two-Year Low

Oil Rises From More Than Two-Year Low

Concern over rising OPEC oil supply, weak European and Chinese growth and a stronger dollar pushed Brent to its lowest since June 2012 on Sept 30.

Oil rose from a more than two-year low to over $95 a barrel on Wednesday as a slightly better-than-expected Chinese factory survey countered worries of an economic slowdown in the world’s No. 2 oil consumer and ample supplies.

Growth in China’s manufacturing sector held up in September but remained subdued. The Purchasing Managers’ Index (PMI) came in at 51.1, just ahead of forecasts for a 51 reading and offering some relief to investors worried about slowing growth.

Concern over increasing OPEC oil supply, weak European and Chinese growth and a stronger dollar pushed global benchmark Brent to its lowest since June 2012 on Tuesday, and the same factors are likely to keep a lid on any price recovery.

“The sentiment remains overwhelmingly bearish at the moment: there is little support for demand, while supply is strengthening,” Carsten Fritsch, a commodities analyst at Commerzbank, said.

Brent crude was up 48 cents at $95.15 a barrel by 1313 GMT. On Tuesday, it touched a session low of $94.24, its weakest since June 2012. U.S. crude gained 72 cents to $91.88.

European economic data offered little relief. The euro zone’s PMI shrank to 50.3 in September, its lowest since July 2013 and only slightly above the 50 that separates growth from contraction.

The dollar index rose slightly on Wednesday, weighing on oil prices after reaching a four-year peak on Tuesday.

U.S. crude gained some support from industry group the American Petroleum Institute’s weekly supply report, which said crude inventories fell by 463,000 barrels, rather than increasing by 700,000 barrels as analysts had expected.

Investors will be looking to official inventory data from the U.S. government, due on Wednesday at 1430 GMT, to confirm the surprise drawdown.

ALL EYES ON OPEC

In September, OPEC oil supply jumped to its highest in almost two years, a Reuters survey found, due to a further recovery in Libya and higher output from Saudi Arabia and other Gulf producers.

Iraq’s output also increased in September, with oil-producing southern provinces unaffected by the activities of Islamic State in the north of the country.

A sustained drop below $100 is a concern for some OPEC members, particularly Iran which on Friday called for a joint effort to support prices, and the group may debate whether to cut its output at a meeting on Nov. 27 in Vienna.

Some analysts believe Saudi Arabia, OPEC’s largest producer, could act unilaterally before then if prices continue to slide.

“There is quite a high chance of Saudi Arabia trimming production if prices reach $90 per barrel,” said Michael Hewson, chief market analyst at CMC Markets in London.

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