Oil prices held steady as traders weighed concerns about China’s faltering economy against lower US crude inventories.
(Bloomberg) — Oil prices held steady as traders weighed concerns about China’s faltering economy against lower US crude inventories.
West Texas Intermediate traded near $81 a barrel on Wednesday after losing 2.6% in the week’s first two sessions. Chinese policymakers took further steps to stabilize investor sentiment as jitters in the Asian giant’s stock market and shadow banking industry added to signs that its economy is stuttering.
Prices failed to rally despite further signs that supplies are tight across the world. US crude stockpiles shrank about 6 million barrels last week as refinery runs surged. Strengthening price differentials for cargoes in the Middle East and North Sea also are indicating tightness in global supplies.
“Crude prices are heavy as Wall Street grows nervous with the outlooks for the world’s two largest economies — the US and China,” said Ed Moya, senior market analyst at Oanda. “More traders are realizing that US soft-landing prospects might not be a good thing for conquering inflation.”
Oil has retreated this week after surging for more than a month on supply cuts from OPEC+ linchpins Saudi Arabia and Russia, as well as estimates that worldwide crude consumption is running at a record pace. Banks have cut growth estimates for China as the nation’s gargantuan real estate sector flounders.
Timespreads have narrowed in tandem with crude benchmarks in recent sessions. The gap between WTI’s two nearest contracts was about 41 cents a barrel in backwardation, compared with last week’s intraday peak of 76 cents a barrel. The backwardated structure, however, still implies near-term tightness.
Reflecting that underlying positivity, UBS Group AG raised its forecast for Brent prices at the end of the year by $5 to $95 a barrel.
“Oil demand remains solid,” said Giovanni Staunovo, an analyst at the Zurich-based bank. “The market is tightening up.”
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–With assistance from Yongchang Chin.
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