Oil steadies as China woes persist

Oil prices were little changed on Tuesday as investors stay sour on China’s economic prospects and demand from the world’s top crude importer, limiting the impact of supply cuts.

Brent crude was down 43 cents at $84.03 a barrel by 0816 GMT, while the more active U.S. West Texas Intermediate October contract slipped 37 cents to $79.95 a barrel.

The front-month WTI contract that expires shortly was down 24 cents at $80.48 a barrel on a very limited volume of trades.

China, the world’s second-largest economy, is seen as key to shoring up oil demand over the rest of the year.

But the country’s sluggish economic activity has frustrated markets after a post-COVID reopening boost, while authorities’ pledges to aid recovery have so far fallen short of expectations, including a smaller-than-expected cut in a key lending benchmark on Monday.

“China’s economic weakness … will create a ceiling for them this year, especially as Beijing appears committed to avoiding large-scale fiscal stimulus,” Eurasia Group said in a note.

Amplifying demand concerns is the possibility of another rate hike in the United States, the world’s biggest oil consumer, which central bank officials have not ruled out given persistent inflation.

Meanwhile, the U.S. is expected to continue to draw down stocks. A preliminary Reuters poll showed crude oil and gasoline inventories were expected to have fallen last week, with data from American Petroleum Institute due later on Tuesday.

On the supply side, voluntary supply cuts spearheaded by Saudi Arabia as part of OPEC+ group – the Organization of the Petroleum Exporting Countries (OPEC) and allies – have successfully propped up prices in recent weeks.

However, a possible easing of supply may be on the cards. Iraq’s oil minister is expected to discuss a possible resumption of oil exports with his Turkish counterpart, a source told Reuters on Monday.

Turkey halted Iraq’s 450,000 barrels per day (bpd) of exports – which accounts for roughly 0.5% of global supply – through the northern Iraq-Turkey pipeline in March after an arbitration ruling by the International Chamber of Commerce (ICC).

Seperately on Monday, Shell (LON:RDSa) said it was investigating a possible leak in the 180,000-barrel-per-day Trans Niger oil pipeline.