Oil prices were steady in morning trading on Thursday as an increase in US crude inventories offset optimism over Chinese economic data.
Brent, the benchmark for two thirds of the world’s oil, was trading 0.39 per cent lower at $83.98 a barrel at 12.02pm UAE time, while West Texas Intermediate, the gauge that tracks US crude, was down 0.42 per cent at $77.36 a barrel.
Brent settled 1.03 per cent higher at $84.31 a barrel on Wednesday, while WTI was up 0.83 per cent at $77.69.
US crude inventories — an indicator of fuel demand — rose by 1.2 million barrels last week, while petroleum stocks decreased by 900,000 barrels, the US Energy Information Administration said.
“The positive numbers from China’s PMI [purchasing managers index] overnight helped to support prices, while in the US the inventory stock build was relatively modest by the standard of recent weeks,” said Edward Bell, senior director of market economics at Emirates NBD.
The PMI reading, an indicator of business activity, for China's manufacturing sector stood at 52.6 in February, up from 50.1 in January, above the neutral 50 mark that separates contraction from expansion.
The International Energy Agency expects global oil demand to surge to record levels this year on China’s recovery.
Global oil demand will rise by two million barrels per day to 101.9 million bpd this year, the agency said in its February oil market report.
It previously forecast a growth of 1.9 million bpd.
“The demand outlook might be improving, but the odds that the [US Federal Reserve] will have to do more tightening that will send the economy into a mild recession are growing,” said Edward Moya, senior market analyst at Oanda.
“Oil looks like it will stay stuck in a trading range, but the risks are clearly to the upside.”
Minutes released by the Fed last week showed policymakers expected continuing interest rate increases to bring inflation back down to their long-term goal of 2 per cent.
Most officials agreed to reduce the pace of rate increases to 25 basis points, but a few recommended an increase of 50 bps to bring the Fed Funds rate to a level they considered “sufficiently restrictive”.
Last month, the Fed raised interest rates by 25 bps and indicated that more increases were on the way this year.
This was the Fed's eighth policy rate increase since March 2022 in response to persistently high consumer prices.
The latest increase in interest rates brought the Fed's target range to between 4.5 per cent and 4.75 per cent — about 50 bps away from its end-of-year projection of 5.1 per cent.
