Oil prices steady but oversupply, China stock rout drag

By Henning Gloystein

SINGAPORE (Reuters) - Crude oil prices were steady on Thursday, with U.S. contracts still down around 16 percent since a peak hit in late June, as traders fretted about China's stock market rout, Greece's debt crisis and a glut in supply.

Front-month U.S. crude futures were trading at $51.65 per barrel at 0048 GMT, unchanged from their last settlement, but prices are down over 8 percent since Monday.

Front-month Brent crude was firmer, edging up 3 cents to $57.08 a barrel, but also down some 5 percent since the end of last week.

"The China risks ... present danger for Australia and other economies which are leveraged to commodity exports to China," Ole Hansen, head of commodity strategy at Saxo Bank, said in a note.

"Oil is being pressured on multiple fronts, and China's equity wobble, the prospect of Iran's re-entry to the market and low liquidity all add up to an extremely fraught environment. Oil needs to establish a new range and we would see the WTI crude low around $50 with the upside capped at $58."

China's securities regulator took the drastic step late on Wednesday of ordering shareholders with stakes of more than 5 percent from selling shares for the next six months in a bid to halt a plunge in stock prices that is starting to roil global financial markets.

The announcements came after China's stock market, which has lost a third of its value since June, showed signs of seizing up on Wednesday, as almost half of the country's listed companies scrambled to escape the rout by having their shares suspended and the regulators warned of "panic sentiment" gripping investors.

Meanwhile, a surprise increase in U.S. stockpiles despite the peak demand American summer driving season added to global oversupply as the Organization of the Petroleum Exporting Countries (OPEC) and Russia produce at near record levels.

Iranian exports could also resume at full throttle if major global powers and Iran find a compromise in nuclear talks this week that could lead to a lifting of western sanctions against Tehran.

(Editing by Joseph Radford)