Oil firmed slightly on Tuesday, recovering from a 2% slide in the previous session, as faster than expected economic growth in top crude importer China supported the demand outlook and offset fears over U.S. interest rates.
China’s economy grew by a faster than expected 4.5% in the first quarter, with hopes of oil demand recovery buoyed further by a surge in oil refinery throughput to record levels in March.
“As things stand, it’s all systems go in China, much to the relief of those betting on higher oil prices,” said Stephen Brennock of oil broker PVM.
Brent crude climbed 12 cents to $84.88 a barrel by 0808 GMT while U.S. West Texas Intermediate rose 8 cents to $80.91.
Oil’s upside was limited by the prospect of another increase to U.S. interest rates, which has been supporting the U.S. dollar. Traders expect the U.S. Federal Reserve to raise rates by 25 basis points at its May meeting.
The dollar eased on Tuesday after earlier gains. A stronger dollar makes commodities priced in the U.S. currency more expensive for buyers holding other currencies.
“The next step may depend on global growth and whether the economy can weather the recent storm, particularly in the U.S., where tighter credit could significantly weigh on growth for the rest of the year,” said Craig Erlam of brokerage OANDA, referring to the oil price outlook.
Coming into focus on Tuesday will be the latest snapshot of U.S. inventories. Analysts expect U.S. crude inventories to fall by about 2.5 million barrels and also forecast declines in gasoline and distillates.
The first of this week’s two reports, from the American Petroleum Institute, is due at 2030 GMT.
