Oil rises toward $55, traders say outlook still weak

February 5, 2015 - 15:27 AMT

PanARMENIAN.Net - Oil rose toward $55 a barrel on Thursday, Feb 5, recovering from part of the previous session's slide after China took steps to pour liquidity into the world's second-biggest economy, although traders and analysts said oil's outlook looked weak, Reuters reports.

Crude snapped a four-day winning streak on Wednesday, when the U.S. government said crude inventories increased by 6.3 million barrels, rising for a fourth consecutive week to hit a record high.

The market gained support on Thursday from optimism that steps by China's central bank to pour in fresh liquidity would spur demand for energy in the second-largest oil consumer after the United States.

Brent crude LCOc1 rose 83 cents to $54.99 a barrel by 1016 GMT (05:16 a.m. EST), having fallen more than a dollar intra-day earlier and settling 5.5 percent lower on Wednesday. U.S. crude CLc1 added 60 cents to $49.05.

"It will be some time yet before we see any sustained trend reversal in oil prices," said Carsten Fritsch, analyst at Commerzbank. "There's no basis for a sustained recovery at the moment."

The market remains highly volatile. Oil began to rise last week from near-six-year lows, in part due to a downturn in U.S. rig activity that could eventually dampen rapid growth in shale oil production, only to tumble on Wednesday.

Other participants said it was too soon to expect a sustained price rise.

"I think prices will consolidate around these sorts of levels before moving lower," said Christopher Bellew, a senior broker at Jefferies Bache. "It takes a lot of time for fewer rigs to translate into lower oil production."

A workers' strike in the United States at nine plants, including seven refineries accounting for 10 percent of the country's refining capacity, added to concerns over crude demand.

The United Steelworkers union (USW) said a new contract offer was made by lead oil company negotiator Royal Dutch Shell Plc (RDSa.L) on Wednesday, and that it will respond after considering the offer on Thursday.