Oil prices were little changed on Wednesday despite a large drawdown in U.S. crude oil stocks as investors weighed worries about China’s embattled economy against expectations of tighter supply in the United States.
Brent crude futures edged up 6 cents to $84.95 a barrel by 11:35 a.m. EDT (1535 GMT), while U.S. West Texas Intermediate crude (WTI) fell 2 cents higher to $80.97 a barrel.
Both benchmarks fell more than 1% in the previous session to their lowest since Aug. 8.
U.S. crude oil inventories fell by nearly 6 million barrels last week on strong exports and refining run rates, despite crude production rising to its highest since the coronavirus pandemic decimated fuel consumption, Energy Information Administration data showed on Wednesday.
However, product supplied of gasoline fell by 451,000 barrels per day in the week as peak driving season draws to a close.
“We’re still seeing a subpar gasoline number…it looks like we’re past peak summer travel season for many,” said John Kilduff, partner at Again Capital LLC in New York.
China’s sluggish economy has remained in focus, after retail sales, industrial output and investment figures failed to match expectations, fuelling concern over a deeper, longer-lasting slowdown.
July activity figures have prompted concerns that China may struggle to meet its growth target of about 5% for the year without more fiscal stimulus, and calls for authorities to take decisive steps.
Without giving details, a cabinet meeting chaired on Wednesday by Premier Li Qiang said China would continue to introduce policies aimed at boosting consumption and promoting investment.
Both the OPEC+ group, comprising the Organization of the Petroleum Exporting Countries and allies, and the International Energy Agency (IEA) are banking on China - the world’s biggest oil importer - to galvanise crude demand over the rest of 2023.
Whilst dismal Chinese economic indicators have been causing headaches, providing a justified excuse for investors to go on the defensive, the global oil balance shows no signs of loosening up, PVM analyst Tamas Varga said, citing the latest numbers on U.S. crude inventories.
Investors will also have eyes on minutes from the Federal Reserve’s July policy meeting for further cues on interest rate strategy at the world’s biggest oil consumer.
The outlook in the fourth quarter will “depend on the macroeconomic situation in China primarily, albeit it looks like Saudi will continue to address that via their cuts, if needed”, said Rystad Energy’s research director Claudio Galimberti.
Supply cuts by Saudi Arabia and Russia have pushed up oil prices over the past seven weeks. Figures published on Wednesday showed that Riyadh’s crude exports fell to their lowest since September 2021.