© Reuters. FILE PHOTO: Pump cranes work at sunset at an oil field in Midland, Texas, US August 22, 2018. REUTERS/Nick Oxford
Written by Aarathy Somasekhar and Andrew Haley
BEIJING (Reuters) – Oil prices rose on Thursday, reversing earlier losses, as a possible pause in U.S. interest rate hikes and the passage of a decisive vote on a debt ceiling bill renewed optimism about fuel demand growth picking up in the world’s top oil consumer.
August futures rose 32 cents, or 0.44 percent, to $72.92 a barrel by 0518 GMT, while U.S. West Texas Intermediate crude rose 25 cents, or 0.37 percent, to $68.34 a barrel.
US Federal Reserve officials on Wednesday signaled the possibility of a “skip” rate hike in June, which reflected market expectations of an imminent hike that could slow economic growth and dampen demand for oil.
In addition, the US House of Representatives’ passage of a bill suspending the US government’s debt ceiling of $31.4 trillion improved the chances of avoiding a catastrophic government debt default.
Both benchmarks had fallen sharply in previous sessions, with Brent down 5.6% and WTI down 6.3% as of the close on Wednesday, from last Friday.
“Oil markets may have been oversold in the past two trading days due to sluggish Chinese data and concerns about the debt ceiling. Sentiment rebounded amid passage of the House debt bill, and the signal for a pause in the Fed rate hike also provided an opportunity for a bounce,” said Tina Teng, market analyst. at CMC Markets in Auckland.
Demand indicators from China, the world’s largest oil importer, were somewhat mixed this week.
Factory activity contracted in May to a five-month low, official government data reported on Wednesday, while service sector activity expanded at the slowest pace in four months.
However, the Caixin/S&P Global China Manufacturing Purchasing Managers’ Index (PMI) on Thursday rose to 50.9 in May from 49.5 in April, easing concerns about Chinese industrial demand.
Prices are also struggling to overcome the bearish supply side factors.
{{8849| US crude oil inventories rose by about 5.2 million barrels last week, according to market sources citing figures from the American Petroleum Institute (API) on Wednesday.
Gasoline inventories also increased by about 1.9 million barrels last week, while distillate fuel inventories rose by 1.8 million barrels, according to data from the American Petroleum Institute.
Market participants are awaiting government data on US crude inventories due later on Thursday. The data was delayed by a day due to a holiday in the United States earlier this week. (EIA/S)
Investors have also been eyeing the upcoming June 4 meeting of OPEC+, the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, after mixed signals so far on whether further cuts are likely.
Analysts at HSBC and Goldman Sachs (NYSE:) said they do not expect OPEC+ to announce further cuts at this meeting.