Oil steadied as traders weighed concerns over China’s faltering economy against industry estimates pointing to lower US inventories.
(Bloomberg) — Oil steadied as traders weighed concerns over China’s faltering economy against industry estimates pointing to lower US inventories.
West Texas Intermediate held 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 its stock market and shadow banking industry added to signs that the Asian giant’s economy is stuttering.
Still, the American Petroleum Institute said nationwide crude stockpiles shrank 6.2 million barrels last week, according to people familiar with the figures. Strengthening price differentials for cargoes in the Middle East and North Sea are indicating tightness in global supplies.
“The focus is now firmly on Chinese woes and scepticism is growing whether the beating heart of global and oil demand growth will stage a convincing recovery any time soon,” said Tamas Varga, an analyst at brokers PVM Oil Associates Ltd. in London.
Oil has retreated this week after a surge driven by supply cuts from OPEC+ linchpins Saudi Arabia and Russia, and 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 50 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 Brent forecast for the year-end by $5 to $95 a barrel as demand is set to rise to a record.
“Oil demand remains solid,” said Giovanni Staunovo, an analyst at the bank in Zurich. “The market is tightening up.”
To get Bloomberg’s Energy Daily newsletter direct into your inbox, click here.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.