© Reuters. FILE PHOTO: Pump crews work at sunset in an oil field in Midland, Texas US on August 22, 2018. REUTERS/Nick Oxford/File Photo
Yuka Obayashi and Muyu Xu
TOKYO/SINGAPORE (Reuters) – Oil prices edged lower on Wednesday as hopes for a rebound in China’s interest rates and an unrelenting suggestion that oil producers tackle global concerns.
It rose 22 cents, or 0.3%, to $86.35 a barrel by 0501 GMT after falling 2.3% in the previous session. US West Texas Intermediate (WTI) crude rose 13 cents, or 0.2%, to $80.26 a barrel, after falling 1.8% on Tuesday.
“Expectations that Chinese oil prices will rebound in the second half of the year are growing and should support market sentiment,” said Hiroyuki Kikukawa, senior manager of research at Nissan (OTC:) Securities.
Analysts from Bank of America (NYSE: ) Securities say the reopening of China’s economy could lead to an increase in demand over the next 18 months.
On the oil supply side, volumes are expected to remain stable in the short term as the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, are expected to maintain their share.
OPEC+ is expected to agree on the terms of the oil producer group’s proposal when it meets next week, five OPEC+ sources said on Tuesday, as expectations for China’s output are weighed down by concerns about inflation and the global economy.
OPEC+ in October decided to cut output by 2 million barrels per day from November to 2023 due to the economic slowdown.
However, gains in oil prices were offset by a larger-than-expected build in US crude inventories reported after the market settled on Tuesday.
stocks rose by about 3.4 million barrels last week on January 20, according to market sources citing figures from the American Petroleum Institute. That was three times the forecast of nearly 1 million arrests in an early Reuters poll on Monday.
Nissan Kikukawa, however, hopes that the construction “will be short-lived because the disruption of the cold weather in the United States a few weeks ago may affect more in the next few weeks”.
Data from the US Energy Information Administration will be released on Wednesday.
Kikukawa expects WTI to trade between $75 and $85 a barrel in the coming weeks.
Markets are also looking at interest rate decisions from central banks for trading information.
“It appears that the absence of hawkish Fed comments on the long-term dark climate has removed the main downside risk for the time being, allowing growth to resume,” Yeap Jun Rong, market analyst at IG, said in a statement.
Investors are waiting to see if the US Federal Reserve will “take immediate action on inflation and growth” when it meets next week, the analyst added.
Data on Wednesday showed Australian inflation shot to a 33-year high last quarter as the cost of travel and electricity jumped, raising fears that the country’s central bank will raise interest rates again next month.