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Oil price rebounds after historic fall under $30 a barrel

Oil prices have collapsed by about two-thirds in 18 months
An oil derrick is seen near vineyards north of the Grapevine in central California's Kern County (AFP)

Brent crude oil rebounded Thursday, after collapsing under $30 a barrel for the first time in more than 12 years on global oversupply and Chinese demand woes.

At about 12:30 GMT, European benchmark Brent North Sea crude for delivery in February gained 51 cents, or 1.7 percent, to stand at $30.82 compared with Wednesday's close.

News of rising US stockpiles had sent Brent oil prices tumbling underneath $30 a barrel on Wednesday for the first time since 2004.

Brent slumped to $29.73 - the lowest since 12 February 2004 - before rebounding Thursday. US benchmark West Texas Intermediate (WTI) for February rose 38 cents, or 1.3 percent, to $30.86 a barrel. 

New York crude had already breached the key psychological barrier on Tuesday, when it touched $29.93 - a level last seen on December 2, 2003.

"Having seen US crude prices dip below $30 a barrel on Tuesday, Brent prices followed suit yesterday... before bobbing back," said CMC Markets analyst Michael Hewson.

"The main question remains as to how much further crude oil prices can fall with the prospect of a move towards the 2004 lows at $28 the potential next target."

Oil prices have collapsed by about two thirds in 18 months as supplies outweigh demand growth owing to a slowdown in the world economy, and particularly in key consumer China.

The US government's Energy Information Administration (EIA) said on Wednesday that domestic commercial oil stockpiles rose 200,000 barrels in the week ending 8 January, adding to the global supply glut.

The EIA meanwhile cut its global oil demand forecast slightly to 95.19 million barrels a day this year, while raising its forecast for global production.

"Oil prices continued trending downwards this week amid persistent concerns on global oversupply," Sanjeev Gupta, who heads the Asia-Pacific oil and gas practice at EY, told AFP.

The looming return of Iranian oil to world markets after the final implementation of a deal on its nuclear programme - which Tehran expects by Sunday - also weighed on prices.

Oil prices "won't see much recovery this year amid a supply glut," said Bernard Aw, market strategist at IG Markets in Singapore.

"As a result, oil prices should continue to remain low, where a sustained pick-up is expected only in the third quarter of 2017," he added.

The market will be closely watching China's economic growth data to be released early next week, according to dealers.

China, the world's second-biggest economy and the top energy consumer, is experiencing a slump in its economic growth and has recently been hit by turmoil in its stock market.

The fall in oil prices, though damaging for oil-dependent developing countries, could provide benefits to motorists in other countries.

According to some experts, fuel could end up being cheaper than bottle water in the UK if there is a continued fall in oil prices.

A spokesperson for the British RAC said that UK motorists could end up paying 86p per litre, presuming the pound maintains its current strength against the dollar

"Breaking through the pound a litre price point for both petrol and diesel was clearly a welcome landmark, but it looks as though there is more to come," said Simon Williams, RAC fuel spokesman, speaking to Sky News.

"In fact we may get to a bizarre time when a litre of fuel is cheaper than a litre of some bottled waters."