By Arathy Somasekhar
(Reuters) – Oil prices held steady in early trading on Wednesday after a 1% drop in the previous session, as markets weighed weak economic data from China, the world’s biggest oil importer, against tightening supplies.
futures rose 3 cents to $84.92 a barrel at 0001 GMT, while U.S. West Texas Intermediate crude (WTI) rose 5 cents $81.04. Both benchmarks had weakened to their lowest since Aug. 8 on Tuesday.
Supporting prices in early trade, U.S. crude stocks dropped by about 6.2 million barrels last week, according to market sources citing American Petroleum Institute figures. That was a much bigger draw than the 2.3 million drop analysts polled by Reuters expected.
U.S. government data on inventories is due later on Wednesday. [EIA/S]
Weighing on the market, China’s economic activity data for July released on Tuesday, including retail sales, industrial output and investment, failed to match expectations, fuelling concern over a deeper, longer-lasting slowdown in growth.
Beijing cut key policy rates to shore up activity, but analysts say more support is needed to revitalise growth.
The July activity data has prompted some economists to flag risks that China, the world’s biggest oil importer, may struggle to meet its growth target of about 5% for the year without more fiscal stimulus.
Meanwhile, stronger-than-expected retail sales data in the United States, the world’s top oil consumer, stoked worries that interest rates could stay higher for longer.
Minneapolis Federal Reserve President Neel Kashkari on Tuesday said that while the U.S. central bank has made some progress in its inflation fight, interest rates may still need to go higher to finish the job. High borrowing costs for businesses and consumers could slow economic growth and reduce oil demand.
A report that ratings agency Fitch could downgrade multiple banks also pressured markets.
Supply cuts by Saudi Arabia and Russia, part of the OPEC+ group comprising the Organization of the Petroleum Exporting Countries (OPEC) and allies, have pushed up oil prices over the past seven weeks.
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