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(Bloomberg) — Oil steadied as signs of another inventory draw in the US were balanced out by concerns about Chinese demand and continued uncertainty over the timeline for Federal Reserve interest-rate cuts.
Brent traded below $85 a barrel after falling by more than 3% over the last three sessions, with West Texas Intermediate above $81. The American Petroleum Institute said crude stockpiles shrank by 1.92 million barrels last week, with a drawdown also logged at the key Cushing, Oklahoma, hub, according to people familiar with the figures. Total holdings sank more than 12 million barrels the prior week.
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Still in China, the world’s largest oil importer, data on Wednesday underscored the nation’s economic challenges, with deflationary pressures persisting as factory-gate prices fell. That followed a spate of earlier signals that suggest diminished appetite for crude from some of the nation’s refiners.
Oil remains comfortably higher for the year, with gains supported by OPEC+ supply cuts, as well as expectations for looser US monetary policy. Powell said on Tuesday that while he was watching for signs of labor market weakness, policymakers still wanted to see more evidence that inflation was slowing before reducing borrowing costs.
“Concerns over Chinese oil demand have been growing recently and the latest inflation data will do little to ease these concerns, with it coming in weaker-than-expected,” said Warren Patterson, head of commodities strategy for ING Groep NV. Meanwhile, Powell’s comments didn’t have too significant a market impact with expectations for a September rate cut little changed, he said.
Crude’s recent listless trading has seen gauges of volatility decline. Brent’s implied volatility — a forecast of likely movement in oil futures that’s tied to options pricing — is near the lowest level in about six years.
Traders will scour a monthly report from the Organization of the Petroleum Exporting Countries later Wednesday for more on the global market outlook. The International Energy Agency will release its corresponding view a day later.
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