Oil prices fall on global glut fears

Oil prices fell on Monday as oversupply concerns, a firmer dollar and lacklustre US non-farm payrolls data weighed on global markets, but a rebound in Chinese stocks after a two-day holiday helped prop up prices.

The long Labor Day holiday in the US may also lead to thin trading until US markets open in the next session.

“I think there is a bit of investor relief China’s stock market opened relatively firm,” said Ric Spooner, chief market analyst at Sydney’s CMC Markets.

China’s main indexes rose on Monday in the first trading after a two-day holiday during which further restrictions on futures trading were announced.

Oil prices have seesawed in recent weeks due to turmoil in global stock markets after a devaluation of its currency and weaker economic data raised concerns about a slowing Chinese economy.

A surprise build in US crude inventories and fears of a global oil glut, a stronger dollar and uncertainty on a possible interest rate hike when the US Federal Reserve policymakers meet next week all weighed on sentiment, Spooner said.

“There is a 30% probability attached (by investors) to a September (rate) increase,” Spooner said.

Brent crude for October delivery fell 37 cents to $49.24 a barrel as of 0656 GMT, after ending the previous session down $1.07, or 2.1%. The European benchmark fell almost 1% last week.

US crude for October delivery, also known as West Texas Intermediate, was down 32 cents at $45.73, after settling 70 cents down, or 1.5%, in the previous session.

“US non-farm payrolls turned out weaker than expected, causing oil prices to fall on anticipations of a weaker economy,” Singapore’s Phillip Futures said in a note on Monday.

US jobs data on Friday showed non-farm payrolls increased 173,000 last month compared with economists’ forecasts of a 220,000 gain.

A surprise gain in US crude stocks of 4.7mn barrels in the week to August 28, the biggest one-week rise since April, added to worries of an oil glut.

That was despite the number of US oil rigs falling by 13 to 662 last week, according to Baker Hughes data, the first decline in rig counts in seven weeks.

“If we continue to see cuts in production it may be a constructive development” for oil prices, Spooner said.

A firmer US dollar also hurt oil prices by making the commodity more expensive for holders of other currencies.

Investors are now waiting for second-quarter Eurozone GDP growth figures on Tuesday to give oil further direction. (Gulf Times)