Update: Oil prices up in Asian trade

[SINGAPORE] Oil rose in Asia on Thursday as dealers digested a mixed US energy report showing a dip in crude inventories, but barely any decline in production despite sinking prices.

US benchmark West Texas Intermediate for October delivery gained 86 US cents to US$39.46 while Brent crude for October rose US$1.07 to US$44.21 in late-morning trade.

The US Department of Energy said on Wednesday US crude supplies unexpectedly fell by 5.5 million barrels for the week ending August 21, indicating healthy demand.

However, US crude production slipped a scant 11,000 barrels a day in the same period, keeping output above 9.3 million barrels and not far from a decades-high production level.

In another bearish indicator, gasoline supplies increased by 1.7 million barrels, adding to concerns of a global glut of energy supplies.

Despite the gains in Asian trading, Singapore's United Overseas Bank said the mixed report compounded "negative sentiment after worldwide falls in equities that helped drag fuel prices to six and a half year lows".

Oil prices hit their lowest levels since early 2009 on Monday over concerns China's slowing economy will curb demand for the commodities that have helped drive its growth over the past three decades.

The devaluation of the yuan two weeks ago largely fuelled the economic fears that sparked the rout, which also saw heavy losses in most global commodities and equity markets.

London-based Capital Economics predicted a rebound in commodities markets, saying that "much of the bad news was already baked in the cake before the latest sell-off".

"We think commodity prices will now stabilise and perhaps even edge higher and we disagree with the doomsday scenarios for China's economy that are currently doing the rounds," it said.

AFP