(Reuters) – Oil prices were little changed on Wednesday as investors weighed worries about China’s embattled economy against expectations of tighter supply in the United States.
Brent crude futures edged up 10 cents to $84.99 a barrel by 1325 GMT, while U.S. West Texas Intermediate crude (WTI) crept 2 cents higher to $81.01 a barrel.
Both benchmarks fell more than 1% in the previous session to their lowest since Aug. 8.
China’s sluggish economy is in focus, after retail sales, industrial output and investment figures failed to match expectations, fuelling concern over a deeper, longer-lasting slowdown.
July activity figures have prompted concerns that China may struggle to meet its growth target of about 5% for the year without more fiscal stimulus, and calls for authorities to take decisive steps.
Without giving details, a cabinet meeting chaired on Wednesday by premier Li Qiang said China would continue to introduce policies aimed at boosting consumption and promoting investment.
Both the OPEC+ group, comprising the Organization of the Petroleum Exporting Countries and allies, and the International Energy Agency (IEA) are banking on China – the world’s biggest oil importer – to galvanise crude demand over the rest of 2023.
Whilst dismal Chinese economic indicators have been causing headaches, providing a justified excuse for investors to go on the defensive, the global oil balance shows no signs of loosening up, PVM analyst Tamas Varga said, citing the latest numbers on U.S. crude inventories.
Market sources citing American Petroleum Institute figures estimated U.S. crude stocks dropped by about 6.2 million barrels last week, a far bigger draw than the 2.3 million drop analysts polled by Reuters expected.
U.S. government data on inventories is due later on Wednesday. [EIA/S]
Investors will also have eyes on minutes from the Federal Reserve’s July policy meeting for further cues on interest rate strategy at the world’s biggest oil consumer.
The outlook in the fourth quarter will “depend on the macroeconomic situation in China primarily, albeit it looks like Saudi will continue to address that via their cuts, if needed”, said Rystad Energy’s research director Claudio Galimberti.
Supply cuts by Saudi Arabia and Russia have pushed up oil prices over the past seven weeks. Figures published on Wednesday showed that Riyadh’s crude exports fell to their lowest since September 2021.
