Oil prices held steady on Wednesday, with the global benchmark Brent crude hovering near the one-month low it reached in the previous trading session. This came as signs of weakening demand growth in China clashed with the prospect of declining U.S. oil inventories.
Brent crude oil futures were down by 4 cents to $83.69 per barrel by 03:15 GMT. Meanwhile, the U.S. West Texas Intermediate (WTI) crude futures also eased 4 cents to $80.72.
Both benchmark oil prices had dropped in the three prior trading sessions, with Brent crude futures trading as low as $83.30 on Tuesday, the lowest since June 17.
Inventory draw limits downside
While concerns over Chinese demand continue to weigh on investor sentiment, the drawdown in U.S. crude inventories is a factor limiting the downside in oil prices, according to Priyanka Sachdeva, senior market analyst at the Singapore-based brokerage Phillip Nova.
“Steady U.S. retail data also points out that the economy is still healthy despite higher borrowing costs, which neutralizes fears of a slowdown in the U.S. economy and dented demand for oil,” Sachdeva added.
China’s slowing growth weighs on prices
China, the world’s top oil importer, saw its economy grow 4.7 percent in the second quarter, the slowest growth since the first quarter of 2023, official data showed earlier this week.
Dollar strength impacts oil prices
A stronger U.S. dollar has also put downward pressure on oil prices, said ANZ Bank analyst Daniel Hynes in a note. The dollar index was slightly higher for a third consecutive session on Wednesday, making oil more expensive for investors holding other currencies.
U.S. inventory data in focus
In the United States, the world’s largest oil producer and consumer, crude oil inventories fell by 4.4 million barrels in the week ended July 12, according to data from the American Petroleum Institute. Analysts polled by Reuters had estimated a smaller drawdown of 33,000 barrels. The U.S. Energy Information Administration will release its official storage report later on Wednesday.
Read more: Oil prices dip amidst Chinese economic slowdown, anticipation of Fed interest rate cuts
Resilient U.S. retail sales support prices
Supporting oil prices, U.S. retail sales were unchanged in June as a drop in receipts at auto dealerships was offset by broad strength elsewhere, a display of consumer resilience that bolstered economic growth prospects for the second quarter.
Geopolitical risks limit downside
Meanwhile, rising geopolitical risk is also helping limit oil price declines, according to Growmark Energy analysts. A Liberia-flagged oil tanker was assessing damage and investigating a potential oil spill after it was attacked in the Red Sea, the Red Sea and Gulf of Aden Joint Maritime Information Center (JMIC) said on Tuesday.
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