TOKYO (Reuters) – Oil futures traded sideways on Tuesday, after mostly weaker-than-expected data from China reflected demand expectations from the world’s largest crude importer while the United States plans to refill the Strategic Petroleum Reserve (SPR) to support prices. .
Supply concerns stemming from wildfires in Canada supported prices early in the morning.
Brent crude futures rose 1 cent, or 0.1 percent, to $75.24 a barrel by 0650 GMT, while US West Texas Intermediate crude was $71.1 a barrel, down 1 percent, or 0.01 percent.
Both benchmarks rose more than 1% on Monday, reversing a 3-session losing streak.
On Monday, the US Energy Department said it would buy three million barrels of crude oil for the Strategic Petroleum Reserve for delivery in August, and requested bids by May 31.
“The market got a boost from expectations that the US strategic reserve oil buyback will continue if WTI prices fall near or below $70 a barrel,” said Toshitaka Tazawa, an analyst at Fujitomi Securities Co., Ltd.
“The gains were also driven by bargain hunting by some investors after the recent sharp declines,” he said.
Oil prices came under pressure later in the session as data from China – showing lower-than-expected industrial production and retail sales growth in April – indicated that the world’s No. 2 economy lost momentum at the start of the second quarter.
Still, a rise in oil refinery productivity in China by 18.9% in April from a year earlier to the second highest level on record helped keep crude prices lower.
As refineries build up inventories ahead of the summer traveling season, China’s crude imports are heading for about 11 million bpd, up from 10.67 million bpd in April, Refinitiv Oil Research said.
Data compiled from Wood Mackenzie also showed that productivity in China in June is also expected to grow by 1.5% on a monthly basis.
“Demand in China continues to show signs of improvement. Transport data shows increased car use, while international air travel is increasing,” ANZ analysts said.
On the supply side, widespread fires in Alberta, Canada, which have forced more than 30,000 people from their homes at one point, have shut down at least 319,000 barrels of oil equivalent per day (boepd), or 3.7% of national production.
Global crude supplies could also contract in the second half as OPEC+ – the Organization of the Petroleum Exporting Countries and allies including Russia – plan additional production cuts.
Data from the Energy Information Administration showed that US oil production from the seven largest shale basins is set to rise in June to the highest level on record.
“With so much uncertainty surrounding the macro environment, the lack of any strong signals from the physical market is likely to result in continued pressure on oil prices,” ANZ analysts said in a note.
Leon Lee, an analyst at CMC Markets, said that the global macroeconomic situation and energy demand and supply fundamentals in Europe will be key drivers for prices in the second half of 2023.
(Reporting by Yuka Obayashi) Editing by Himani Sarkar
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