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Oil on track for seventh monthly fall as supply glut weighs
[LONDON] Oil prices were steady near US$49 a barrel early on Friday with some support from new Chinese reserve regulations yet remained on track for a seventh monthly fall weighed by a global supply glut.
Data this week showed US crude oil inventories had reached their highest levels since the 1930s.
Brent crude oil futures were down 4 cents at US$49.09 per barrel at 0839 GMT, while benchmark US WTI futures were up 25 cents at US$44.78 a barrel.
Brent is on track to post a 14 per cent fall for January, marking a seventh month of decline.
Although Brent prices have kept within a band of US$45-US$50 a barrel for most of the month, high global stock levels threaten further declines, said Amrita Sen, chief oil analyst at London-based Energy Aspects.
"Given the scale of the stock builds, we aren't out of the woods yet," Mr Sen said. "The fundamentals remain weak, with seasonal refining maintenance resulting in stock builds on what is an already high base for stocks."
The International Energy Agency this month said a price rebound could take some time despite increasing signs of the downturn easing with lower output from North America shale production and higher demand due to the low prices.
The market found some support from China, where new commercial crude reserves regulations are likely to boost import demand in the short term.
Chinese refineries will be expected to store enough crude for 15 days of average throughput, the country's top economic planner said this week, forcing many commercial oil traders to import crude in the short term to meet the requirements.
Despite this short-term support from China, analysts said the overall market outlook remained weak as producers were keeping output high and adjusting to a lower-price environment.
"It looks increasingly difficult to see any voluntary supply cutbacks in commodity markets," ANZ bank said in a research report. "Falling energy prices and exchange rates are having a material impact on bottom lines, allowing producers to potentially ride out current price weaknesses."
ANZ said that the weakened Russian rouble currency, which has lost 50 per cent of its value against the dollar in the past six months, was having a particularly strong impact on oil markets.