Oil prices fall on China equity losses

LONDON - Oil fell on Monday as Chinese equities weakened, with a firmer dollar and global oversupply weighing on prices.

The U.S. Labor Day holiday helped keep trade thin.

China's main indexes closed down on Monday as investors sold shares in the aftermath of a four-day market holiday, during which further restrictions on futures trading were announced.

"Oil is only taking its cues from China this morning," SEB chief commodity analyst Bjarne Schieldrop said.

"The price is taking little notice of constructive data like stronger (European) equities, stronger base metals and last Friday's fall in U.S. rig count," he said.

Brent crude for October was down 75 cents at $48.86 a barrel by 1030 GMT. U.S. crude for October was down 70 cents at $45.35.

Oil has fallen almost 60 percent since June 2014 on a global supply glut. Prices have seesawed in recent weeks as concerns about a slowing Chinese economy caused turmoil in global stock markets.

"For commodities, the key demand-side figure to care about is not China’s GDP growing at 7 percent instead of 9 or 10 percent, it is the manufacturing price index, which has been falling for more than 40 months in a row," JBC Energy said.

A surprise gain in U.S. crude stocks of 4.7 million barrels in the week to Aug. 28, the biggest one-week rise since April, added to worries about oversupply.

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

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

The year-long decline in oil prices caused more than 5,000 job losses in Britain's North Sea oil and gas sector since late last year, the country's Oil and Gas Authority said on Monday.

Investors are awaiting euro zone second-quarter gross domestic product figures on Tuesday, followed by monthly global oil supply and demand data from U.S. and global energy authorities to give oil further direction.  — Reuters

Oil prices rally above $55 as investors pile in

LONDON - Crude oil prices rose on Monday as investors shrugged off a U.S. refinery strike and focused on a falling U.S. rig count that signaled lower production down the line.

"There were a lot of people on the sidelines waiting for an opportunity to buy," said Bjarne Schieldrop, chief commodity analyst at SEB.

"Brent has struggled sideways for a long time but it closed above the 20-day moving average on Friday for the first time since July, and the rig count is falling sharply. So now they think, maybe this is the time to buy."

At 6:49 a.m. ET Brent crude futures were up $2.05 at $55.04 a barrel, after leaping as high as $55.62 and dipping as low as $51.41, as the bulls battled with the bears.

U.S. crude was up $1.50 at $49.74 a barrel, after touching an intraday high of $50.56 and slumping to $46.67.

Both contracts had rallied about 8 percent on Friday, fueled by month-end short-covering and a record weekly drop in the number of U.S. oil rigs employed, according to industry data from Baker Hughes. The count is now down 24 percent from its October peak.

"Most market observers have been surprised by the scale of the decrease, and expectations of U.S. oil output this year will no doubt be lowered accordingly," analysts at Commerzbank said in a note. "The foundation for a steady price recovery in the second half of the year has thus been laid."

However, in the short term the price increase has been exaggerated, as there is still considerable oversupply, they added.

Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas, said the bounce was mainly due to technical factors rather than any fundamental reason.

"I wouldn't be surprised if this afternoon we sell into (the rally) because the global fundamentals in oil and the economy haven't really changed much since last week," he said.

On Sunday, workers at nine U.S. refineries and chemical plants went on strike in an effort to pressure oil companies to agree to a new national contract.

"So far only a handful of refineries have been affected, but the last time they went on strike like this, in 1980, it lasted for three months," said Ole Hansen, senior commodity strategist at Saxo Bank.

Last week U.S. crude inventories hit a record high, and any dampening of refinery demand would likely push stocks higher as the slowdown in drilling has still not affected U.S. production, analysts said. [EIA/S]

"The market is likely too excited about falling rig counts," analysts at Morgan Stanley said in a note on Monday. "The most productive rigs will likely remain as long as possible."  — Reuters