Oil edges up 'but concerns over China weigh heavily on market'

Oil prices regained some ground on Thursday (August 13th) due to lower reserves in the US and record-high numbers of Chinese diesel exports.

However, concerns surrounding China's economy - the world's second biggest - continue to weigh heavily on the minds of traders, as the devalued yuan tumbles for the third consecutive day.

Last week, it was revealed that US oil reserves had dropped by 1.7 million barrels, helping to to put a temporary hold on the price collapse that has plagued the commodity for months. West Texas Intermediate (WTI) crude and Brent crude have shed almost one-quarter of their value since May 2015.

On Thursday, US crude added 20 cents, taking the price per barrel to $43.50 by 06:25 BST, while Brent crude gained 30 cents, pushing the price up to $49.96.

According to the International Energy Agency (IEA), oil demand growth in 2015 is set to be the strongest for the last five years, but oversupply will be an issue that plagues markets well into 2016.

Reuters reports that l/c Energy consultancy FGE claims that record Chinese diesel exports for June - around 166,000 barrels per day - have bolstered demand for crude, as refiners purchase more of the commodity to produce more fuel. 

However, there have been doubts cast on how long this demand would last in China, as its slowing economy has led the People's Bank of China to devalue the currency, which has the potential to constrain demand for fuel imports in the country. 

In July, implied oil demand dropped in the East Asian nation compared to June, while vehicle sales fell - which could work together to stunt growth in the last six months of this year. China consumed around 10.1 million barrels of oil per day in July, a decline of four per cent compared to the previous month. 

Howie Lee of Phillip Futures told the Reuters Global Oil Forum: "All is not well with the Chinese economy. There is so much pessimism attached to this move [yuan devaluation]. For China to start a fresh currency war... smacks of desperation."

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