Oil was steady after a two-day drop as concerns about waning demand in top importer China were tempered by an industry-funded report pointing to a decline in US inventories.
West Texas Intermediate futures for October traded below $80 a barrel after slipping 1.3% over the previous two days. China’s stuttering economy is now the biggest threat to global commodities demand, as deteriorating economic activity and credit flows puts Beijing’s modest growth targets at risk.
The industry-funded American Petroleum Institute said nationwide stockpiles fell 2.4 million barrels last week, a bullish signal if confirmed by official Energy Information Administration data due later on Wednesday.
Crude’s rally since late June has faltered over the last couple of sessions due to the worsening outlook in China, signs the Federal Reserve isn’t yet done with its campaign of monetary tightening, and a strengthening dollar. That’s overshadowed a tightening market following supply cuts by OPEC+ kingpins Saudi Arabia and Russia.
“Growing expectations that the US Fed still has more to do with its tightening cycle, along with broader strength in the US dollar, has left the oil market facing some strong headwinds,” said Warren Patterson, head of commodities strategy at ING Groep NV. “However, given that fundamentals remain constructive, we believe any price weakness will be relatively short-lived.”
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