Oil holds steady as economic fears weigh against potential crude draw
Oil prices held steady during Asian trade on Tuesday amid mixed data from China, and as the market weighed forecasts of declining crude stockpiles with expectations of a U.S. interest rate hike, News.Az reports citing Reuters.
Brent crude was up by 7 cents to $79.38 a barrel by 0425 GMT, while U.S. West Texas Intermediate (WTI) crude rose 11 cents to $75.77 a barrel. Both benchmarks fell by more than $1 in their last session.
China's manufacturing activity unexpectedly fell in April, official data showed on Sunday, the first contraction since December in the manufacturing purchasing managers' index.
China's industrial and economic recovery from the coronavirus pandemic was expected to boost demand this year.
"Crude oil fell after weak economic data from China raised concerns about a patchy recovery," said analysts in an ANZ Research note, referring to China's manufacturing activity data.
There are however positive signs of recovery based on spending during the five-day Golden Week holiday in the world's largest oil importer, ANZ added.
"State broadcaster CCTV said that major retail and catering companies have seen sales jump 21% year-on-year, based on Ministry of Commerce data. A record 19.7 million railway trips were made across the country. Traffic is also expected to be 20% higher than in 2019, according to local media."
Over the weekend, CCTV reported that passenger travel on the first day of China's Labour Day holiday surged 151.8% from the same day last year, while the number of air, road, waterway and railway trips rose to 56.99 million on the first day of the holiday.
Meanwhile, a Monday poll showed that U.S. crude oil stockpiles are expected to have fallen for a third consecutive week, providing some support to the market.
The poll was conducted ahead of reports from the American Petroleum Institute, an industry group, due at 4:30 p.m. EDT (2030 GMT) on Tuesday, and the Energy Information Administration, the statistical arm of the U.S. Department of Energy, due at 10:30 a.m. (1430 GMT) on Wednesday.
However, the U.S. Federal Reserve, which meets on Tuesday and Wednesday, is expected to increase interest rates by another 25 basis points. Interest rate hikes often reduce demand.
Banking fears have also weighed on oil in recent weeks and in what is the third major U.S. institution to fail in two months, U.S. regulators seized First Republic Bank over the weekend ahead of a deal in which JPMorgan bought most of its assets.