Oil pared early losses on Wednesday after China signaled it would take steps to boost a flagging economy, and as traders awaited further news about the potential resumption of the Iran nuclear deal.
West Texas Intermediate futures was little changed near $86.50 a barrel having earlier dropped to a fresh seven-month low, while Brent traded below $92 a barrel.
China’s Premier Li Keqiang has urged more pro-growth measures, while US industrial data beat estimates on Tuesday. But concerns over global economic growth and its consequent effect on oil demand remain pervasive. Discussions over a revived nuclear deal with Iran are progressing, with the European Union viewing Iran’s response as constructive.
“Right now, there’s not a lot of logic in the market, because gas prices are high, people are expecting a recession, which will then curtail oil demand.” Energy Aspects director of Research Amrita Sen said on Bloomberg Television. “But somehow it’s a very one-sided story right now and I think a lot of traders are actually betting and putting on positions which are long gas short crude,” she said.
The Biden administration is weighing Iran’s response to a European Union proposal, with officials on both sides of the Atlantic signaling the possibility that a deal could emerge after more than a year of false starts. However, Goldman Sachs Group Inc. said an accord was still unlikely in the short term.
Additional supply could heap more pressure on prices as concerns over an economic slowdown cloud the demand outlook. Time spreads have narrowed significantly, signaling an easing of tight crude markets.
Still, OPEC’s new Secretary-General Haitham Al Ghais told Bloomberg on Wednesday he was confident world oil demand will rise by almost 3 million barrels a day this year while spare production capacity was “becoming scarce.”
Meanwhile, the American Petroleum Institute reported crude inventories fell by 448,000 barrels last week, while gasoline stockpiles increased by more than 4 million barrels, according to a person familiar with the figures. Government data is due later Wednesday.
- WTI for September was unchanged at $86.51 a barrel on the New York Mercantile Exchange at 1:15 p.m in London.
- Futures declined 3.2 per cent on Tuesday.
- Brent for October settlement is 0.41 per cent lower at $91.96 a barrel on the ICE Futures Europe exchange.
- Brent’s prompt spread was 55 cents in backwardation, compared with $2.08 at the start of the month.
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