Oil market makes fresh gains

Oil market makes fresh gainsWorld oil prices rose further Tuesday on forecasts that US shale oil production will decline and hopes the Chinese government will roll out a stimulus package for the slowing economy.

US benchmark West Texas Intermediate for delivery in May won 44 cents to $52.35 a barrel.

Brent North Sea crude for May gained 32 cents to $58.25 per barrel at about midday in London.

A drop in American production is expected to help ease the supply glut that has sent oil prices collapsing since June last year, while a stimulus package could boost demand in China, the world’s biggest energy user, analysts said.

The US government’s Energy Information Administration said Monday shale oil output could decline in May, which Bloomberg News said was the first time the agency had projected a drop since it began issuing a monthly drilling productivity report in 2013.

David Lennox, Resource analyst for Fat Prophets in Sydney, said the projection was “positive for the market as it could signal the start of a decline for US shale crude oil production”.

He said however the market was still interested in the weekly US stockpiles report to be released Wednesday “which will better indicate whether the oversupply situation has diminished”.

American crude stockpiles, a closely watched barometer of demand in the world’s top oil consuming nation, are currently at record levels and Lennox said that he expects it to further increase.

Meanwhile, a decline in China’s trade data in March has stoked expectations of a stimulus package to boost the slowing economy.

Exports fell an unexpected 15.0 percent year-on-year in March to $144.57 billion, the General Administration of Customs said, while imports tumbled 12.7 percent to $141.49 billion.

“The Chinese trade numbers could lead to a surge in import for oil… this can boost demand,” Lennox said.

In its latest forecasts for the region released Monday, the World Bank said China’s economy should expand by 7.1 percent in 2015, slower than the 7.2 percent rate projected in October and down from last year’s 7.4 percent growth.

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