By Sudarshan Varadhan
SINGAPORE (Reuters) -Oil prices looked set to snap a seven-week winning streak on Friday as concerns about China’s slowing economic growth and the possibility of more U.S. interest rate hikes outweighed signs of tightening supply.
Major benchmarks were slightly higher on Friday, with U.S. West Texas Intermediate crude (WTI) rising 22 cents, or 0.3%, at $80.61 a barrel, while Brent crude was up 8 cents, or 0.1%, at $84.12 a barrel as of 0350 GMT.
Brent futures rose by about 18% and WTI by more than 20% in the seven weeks ended Aug. 11 to the highest levels in months before paring some gains this week, when both fell by more than 3%.
The U.S. Federal Reserve’s focus on containing inflation amid stronger-than-expected economic data was keeping a lid on oil prices, which have risen sharply in the recent weeks due to concerns over supply.
The U.S. Labor Department on Thursday reported the number of Americans filing new claims for jobless benefits fell in the last week, suggesting the still-tight employment market could prolong the Fed’s tightening campaign to cool the economy.
That report followed similarly upbeat economic data earlier in the week, including U.S. retail sales, which suggested the Fed may have to stick with higher rates for longer.
Investors fret that higher borrowing costs could impede economic growth and in turn reduce overall demand, including for oil.
Adding to the concerns, a recent batch of economic data from China, the world’s second largest oil consumer, has highlighted a rapid loss of economic momentum since the second quarter.
China’s sputtering economy has whipsawed global financial markets in the past few months, with a property crisis spooking investors amid contagion fears.
However, tightening oil supply due to production cuts by the OPEC+, and increasing demand, mainly due to higher travel and improved industrial activity in the U.S., has supported prices, and could potentially lead to a rise in the coming days, analysts said.
U.S. oil production was offsetting some losses in output due to OPEC+ cuts, but the falling U.S. rig count meant such support could likely be short-lived, ANZ Research said in a report on Friday.
Data released this week also showed that U.S. crude oil inventories fell by nearly 6 million barrels last week on strong exports and refining run rates. Weekly products supplied, a proxy for demand, rose to the highest since December. [EIA/S].
Despite recent economic weaknesses, China made a rare draw on crude oil inventories in July, the first time in 33 months it has dipped into storage.
“Momentum indicators are showing supply tightness. Investors have started increasing their bullish bets, net-long positions are reaching an annual high,” ANZ said in its report.
(Reporting by Sudarshan Varadhan; Editing by Shri Navaratnam and Jamie Freed)
Disclaimer: This report is auto generated from the Reuters news service. ThePrint holds no responsibilty for its content.
Source: The Print
