(Bloomberg) — Oil prices were stabilizing as signs of renewed drawdown in U.S. inventories were offset by concerns about Chinese demand and continued uncertainty over the Federal Reserve’s timeline for cutting interest rates.
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Brent crude has fallen more than 3 percent over the past three trading days to trade below $85 a barrel, while West Texas Intermediate is trading above $81. The American Petroleum Institute said crude inventories fell by 1.92 million barrels last week, with a decline also recorded in Cushing, Oklahoma, a major crude warehouse, people familiar with the data said. Total inventories fell by more than 12 million barrels last week.
In China, the world’s biggest oil importer, data on Wednesday highlighted the country’s economic challenges, with deflationary pressures continuing amid falling ex-factory prices, following a series of signs from some domestic refiners that demand for crude was weakening.
Oil prices have risen sharply so far this year, buoyed by expectations of OPEC+ supply cuts and easier monetary policy in the U.S. Powell said Tuesday that policymakers want to see more evidence that inflation is slowing before cutting borrowing costs, though they are watching for signs of weakness in the labor market.
“Concerns about China’s demand for oil have grown recently, and the latest inflation data was weaker than expected and will do little to ease those concerns,” said Warren Patterson, head of commodity strategy at ING Group AG. Powell’s comments, however, did not have much of an impact on markets, leaving expectations for a September rate cut little changed, he said.
Oil’s recent weak trading has led to lower volatility measures. Expected volatility for Brent crude — a measure that predicts the movement of oil futures linked to options prices — is near its lowest level in nearly six years.
Traders will be scrutinizing the Organization of the Petroleum Exporting Countries’ (OPEC) monthly report later on Wednesday for further insights into the outlook for global markets, with the International Energy Agency (IEA) due to release a similar view the following day.
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