Oil prices rise over 1 percent, but economic worries loom
LONDON (Reuters) – Oil prices rose on Wednesday, boosted by a wider market pickup on positive news from China’s services sector, after three days of losses due to fears about a weakening global economy.
FILE PHOTO: Pumpjacks are seen during sunset at the Daqing oil field in Heilongjiang province, China August 22, 2019. REUTERS/Stringer
Brent crude LCOc1 was up 81 cents, or 1.39%, at $59.07 a barrel by 1210 GMT, while U.S. West Texas Intermediate futures CLc1 gained 84 cents, or 1.56%, at $54.78 a barrel.
U.S. data released on Wednesday showed manufacturing activity contracted in August for the first time in three years, while euro zone activity shrank for a seventh month.
Global markets rebounded after a private survey showed that activity in China’s services sector expanded at the fastest pace in three months in August as new orders rose, prompting the biggest increase in hiring in more than a year.
China is the world’s second-largest oil consumer and largest importer.
But U.S. President Donald Trump on Tuesday warned he would be “tougher” on Beijing in a second term if trade talks dragged on, compounding market fears that trade disputes between the two countries could trigger a U.S. recession.
“The bullish bandwagon seen earlier this year will not be making another appearance,” Stephen Brennock of oil broker PVM said.
“Spearheading these dimming prospects (are) … cooling global economic activity and intensifying trade tensions. The world economy is slowing and nowhere is this pullback in activity more apparent than in the manufacturing sector.”
Data due this week on U.S. oil inventory levels will be delayed by a day to Wednesday and Thursday because of the U.S. Labor Day holiday on Monday.
U.S. crude stockpiles are expected to have declined for a third straight week, a Reuters poll showed on Tuesday.
Some analysts argued that the overall fundamentals of the oil market remain discouraging.
“Crude oil remains troubled by reports that production from OPEC, Russia and the U.S. all rose last month. This (comes) at a time where the strength of demand growth, due to trade war pessimism, has increasingly been called into question,” Saxo Bank commodity strategist Ole Hansen said.
In a possible sign of an easing to months of tension in the energy-rich Gulf, Iranian state television reported on Wednesday that Tehran would free seven crew members of the detained British-flagged tanker Stena Impero.
The vessel was seized two weeks after Britain detained an Iranian tanker off the territory of Gibraltar which was released in August.
Additional reporting by Florence Tan in Singapore; Editing by David Evans and Louise Heavens