Oil Prices Steady Amid Falling US Inventories and China Concerns

Oil prices remained stable on Wednesday, balancing between a decline in U.S. oil stockpiles and signs of weakening demand in China. This stability comes a day after Brent crude hit a one-month low.

Market Movements:

• Brent crude oil futures edged up by 1 cent to $83.74 a barrel by 1013 GMT.
• U.S. West Texas Intermediate (WTI) crude futures increased by 10 cents to $80.86 a barrel.

Influencing Factors:

Gaurav Sharma, an independent oil analyst, noted that China’s weaker economic performance and the rising expectations for a U.S. interest rate cut have counterbalanced each other, maintaining oil prices.

In the U.S., the world’s largest oil producer and consumer, crude oil inventories fell by 4.4 million barrels for the week ending July 12, according to market sources citing American Petroleum Institute data. This decline contrasts with analysts‘ expectations, which predicted a much smaller reduction of 33,000 barrels. The U.S. Energy Information Administration is set to release its official storage report at 1430 GMT, which will provide further clarity.

John Evans, a PVM Oil analyst, pointed out that the API data did not show significant effects from Hurricane Beryl, despite its impact on some infrastructure.

Economic Indicators:

Supporting oil prices were U.S. retail sales figures, which remained unchanged in June. Although auto dealership receipts dropped, strength in other areas demonstrated consumer resilience, suggesting positive economic growth prospects for the second quarter.

Geopolitical Risks:

Rising geopolitical tensions also played a role in stabilizing crude prices. A Liberia-flagged oil tanker was attacked by Yemen’s Houthis in the Red Sea, leading to concerns about potential oil spills and damage assessments.

China’s Economic Performance:

China, the world’s largest oil importer, reported its slowest economic growth since the first quarter of 2023, with a 4.7% increase in GDP for the second quarter. This slow growth has capped potential gains in crude prices.

Svetlana Tretyakova, a senior oil analyst at Rystad Energy, mentioned that market sentiment could be influenced by any announcements from the Third Plenum in Beijing, a key economic leadership meeting, due to China’s significant impact on global oil demand.

Conclusion

Oil prices remain balanced as falling U.S. inventories offset concerns about China’s economic slowdown. Geopolitical tensions and economic data from the U.S. and China continue to play crucial roles in shaping market sentiment. The forthcoming U.S. Energy Information Administration report and potential announcements from Beijing are key factors to watch.

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