Oil prices remain stable as traders consider dismal China data and limited crude supplies

16 Aug 2023 , 10:02 AM

Following a 1% decline in the previous session, oil prices remained stable in early trade on Wednesday as markets evaluated tightening U.S. crude supplies against dismal economic data from China, the world’s largest oil importer.

Brent crude futures increased by 3 cents to $84.92 per barrel, while West Texas Intermediate crude (WTI) increased by 5 cents to $81.04 per barrel. On Tuesday, both benchmarks declined to their lowest level since August 8.

According to market sources quoting American Petroleum Institute data, U.S. crude stocks decreased by roughly 6.2 million barrels last week, which helped to support prices in early trade. Compared to the 2.3 million decline analysts surveyed by Reuters, that was a significantly larger draw.

Later on Wednesday, U.S. government figures on inventories are forthcoming. 

China’s economic activity numbers for July, which were announced on Tuesday and included retail sales, industrial output, and investment, fell short of forecasts, stressing the market and raising worries about a more significant, protracted downturn in growth.

The July activity report has led some economists to warn that without additional fiscal stimulus, China, the largest oil importer in the world, may find it difficult to achieve its annual growth objective of approximately 5%.

In the meantime, stronger-than-anticipated retail sales figures in the United States, the top oil user in the world, fueled concerns that interest rates might rise for an extended period of time.

Neel Kashkari, president of the Minneapolis Federal Reserve, stated on Tuesday that although the U.S. central bank has made some success against inflation, more rises in interest rates may be required to complete the task. High borrowing prices for consumers and businesses might stifle economic expansion and lower demand for oil.

Markets were also under pressure from a suggestion that the ratings agency Fitch would downgrade several banks.

Over the previous seven weeks, the price of oil has increased due to supply reductions by OPEC+ members Saudi Arabia and Russia. OPEC+ is an alliance of OPEC and partners.

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