Oil steady as markets ignore signs of deflation in China

Singapore — Oil prices steadied on Thursday as markets shrugged off deflationary indicators in China and looked for further clues on the status of demand from the world’s two biggest oil consumers.

Brent crude futures rose 8c, or 0.1%, to $79.62 a barrel by 5am GMT. US West Texas Intermediate (WTI) crude futures were up 6c, or 0.1%, at $75.39 a barrel.

The uptick came after both benchmarks fell more than 2% to their lowest since mid-July on Wednesday, as worry over potential supply disruptions in the Middle East eased and concern over US and Chinese demand intensified.

“The more subdued gains still reflect reservations in place, with macroeconomic factors and technicals giving sellers the upper hand for now,” said Yeap Jun Rong, a market strategist at IG.

Thursday’s gains probably reflect an attempt for prices to stabilise after the strong sell-off in previous days, said Yeap.

Meanwhile, China inflation data released on Thursday showed that the consumer price index (CPI) for October fell 0.2% year on year, while producer price index (PPI) data showed a 2.6% year-on-year decline. This was broadly in line with a Reuters’ poll that forecast CPI would fall 0.1% and PPI 2.7%.

Earlier this week, customs data showed that China’s total exports of goods and services contracted faster than expected, though the country’s crude imports in October were robust.

On the plus side for oil demand, China’s central bank governor, Pan Gongsheng, said the country is expected to achieve its annual growth target of 5% for 2023.

For the US, inventory data may indicate a weakening in demand. US crude oil inventories increased by 11.9-million barrels over the week to November 3, sources said, citing American Petroleum Institute figures.

If confirmed, this would represent the biggest weekly build since February. The US Energy Information Administration (EIA), however, has delayed release of weekly oil inventory data until November 15 for a system upgrade.

Barclays on Wednesday cut its 2024 Brent crude price forecast by $4 to $93 a barrel, citing resilient US oil supply and higher output from Venezuela following the relaxation of sanctions on the Latin American producer.

Reuters