China has cut interest rates for the third time in six months to bolster its economy, which is having its worst year in almost 25 years. This has raised hopes that the world’s second largest economy will help decrease the global glut.
Early on Monday Brent crude was up 20 cents and reached $65.59 per barrel, while US light crude traded at $59.59, increasing also by 20 cents.
However, the upward trend didn’t continue for long and oil started to fall under $65 per barrel upon signs that US shale oil production is recovering. For the first time this year, US drillers added rigs to the Permian basin after weeks of drifting rigs. Although the number of active oil rigs in the US has declined for 22 weeks in a row, rate of decline has slowed in recent weeks.
The recovery revived concerns of a growing global glut in supply, thus taking prices 44 cents down to $64.95 a barrel, while US light crude fell 35 cents to $59.04. Due to excess European and African crude supply, Brent fell 1.6 percent last week, distancing itself from 2015 highs.
On Wednesday, the International Energy Agency (IEA) will announce its monthly report and investors will be looking to see if falling prices have triggered global demand for oil.
Meanwhile, despite its slowing economy, China has become the world’s biggest crude importer for the first time. China’s crude oil imports hit a record 7.37 million barrels per day in April.
The world’s second largest economy is expected to increase its crude purchases in the second half of 2015, which is expected to support oil prices that have rebounded about 40 percent since they reached six year lows earlier this year.