Oil prices rise as Japan machinery orders bounce, China reforms import taxes

By Henning Gloystein

SINGAPORE (Reuters) - Crude prices rose on Wednesday as Japan posted stronger than expected machinery orders and China announced an easing of some import taxes, lending the market at least temporary support in an environment of general oversupply.

U.S. crude futures were at $38.08 per barrel at 0209 GMT, up 57 cents from their last settlement. Internationally traded Brent futures were up around half a dollar at $40.74 a barrel.

Traders said the recovery on Wednesday was largely a result of short covering, a surprise lift in Japanese machinery orders and Chinese tax reforms aimed at encouraging imports of advanced equipment, energy raw materials, and key assembly components.

Yet analysts said there remained a plethora of bearish factors that have helped pull down commodity prices since 2014, including the strong dollar, weakening global demand, soaring supplies and the unwinding of a quantitative easing (QE) premium with the U.S. Federal Reserve expected to hike rates soon.

"Whatever the case, a CRB index hovering around 13-year lows and oil prices close to seven-year troughs suggest that commodity producers in general are doing it tough," ANZ bank said, referring to the Thomson Reuters Core Commodity CRB Index falling below 178 points for the first time since 2003.

In oil, a ballooning glut is seen at 0.5 million to 2 million barrels of crude a day in excess of demand, prices are down by almost two-thirds since 2014, and most analysts say they do not see prices rising much until late 2016 at the earliest.

"Low oil prices will continue to weigh on the sovereign credit profiles of major exporters in 2016," rating agency Fitch said. Fitch forecasts Brent to average $55 per barrel next year and $65 per barrel in 2017.

"The impact of the price falls from mid-2014 and changes to our oil price assumptions have been a key driver of sovereign rating actions," Fitch said, adding that it had downgraded several oil producing countries and also put the world's biggest oil exporter, Saudi Arabia, on negative outlook.

While producers suffer from low prices, consumers benefit.

"Price falls represent a windfall to consumers and downstream users. The close to 30 percent fall in oil prices since the start of the year presents a major deflationary impulse," ANZ said.

(Reporting by Henning Gloystein; Editing by Michael Perry and Richard Pullin)