Oil rises as US crude stocks dip, Japan machinery orders bounce

West Texas Intermediate futures at $38.30 a barrel at 0429 GMT, up 79 cents from last settlement; Brent up 64 cents at $40.90

Crude oil prices rose on Wednesday as US stocks dipped, while in Asia Japan posted stronger-than-expected machinery orders and China announced an easing of import taxes, lending the market support amid a continuing supply glut.

US West Texas Intermediate (WTI) crude futures were at $38.30 per barrel at 0429 GMT, up 79 cents from their last settlement. Internationally traded Brent futures were up 64 cents at $40.90 a barrel.

The firmer WTI prices were a result of a surprise 1.9-million-barrel fall in US crude inventories to 488 million barrels last week. The drop, as estimated by industry group the American Petroleum Institute, compared with analysts' expectations for an increase of 252,000 barrels.

 

Official figures from the U.S. Energy Information Administration (EIA) are due on Wednesday at 10:30 EST.

Traders said the recovery in Brent was largely a result of short covering, the surprise lift in Japanese machinery orders and Chinese tax reforms aimed at encouraging imports, including of energy-intensive machinery.

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

"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, while prices are down by almost two-thirds since 2014. 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.

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.