LONDON (Reuters) – Oil prices rose on Wednesday, boosted by a wider market pickup on positive news from China’s services sector, after three days of losses on lingering fears about a weakening global economy.
FILE PHOTO: Pumpjacks are seen during sunset at the Daqing oil field in Heilongjiang province, China August 22, 2019. REUTERS/Stringer
Brent crude LCOc1 was up 46 cents, or 0.79%, at $58.72 a barrel by 1108 GMT, while U.S. West Texas Intermediate futures CLc1 gained 58 cents, or 1.08%, at $54.52 a barrel.
U.S. data released on Wednesday showed manufacturing activity contracted in August for the first time in three years, while euro zone activity shrank for a seventh month.
Global markets rebounded after a private survey showed that activity in China’s services sector expanded at the fastest pace in three months in August as new orders rose, prompting the biggest increase in hiring in over a year.
China is the world’s second-largest oil consumer and largest importer.
But U.S. President Donald Trump on Tuesday warned he would be “tougher” on Beijing in a second term if trade talks dragged on, compounding market fears that trade disputes between the two countries could trigger a U.S. recession.
“The bullish bandwagon seen earlier this year will not be making another appearance,” Stephen Brennock of oil broker PVM said.
“Spearheading these dimming prospects (are) … cooling global economic activity and intensifying trade tensions. The world economy is slowing and nowhere is this pullback in activity more apparent than in the manufacturing sector.”
Citi cut its Brent forecasts for the third and fourth quarters by about $10 a barrel to $62 and $64 respectively, and expects the benchmark to fall to $53 by the end of 2020. Brent is about 23% lower than its peak for this year in April.
“Whether it be scant progress in U.S.-China trade talks or survey data like the U.S. ISM manufacturing survey yesterday that fell in contractionary territory, the economic news flow is not helping to lift market spirits,” said Harry Tchilinguirian, global oil strategist at BNP Paribas in London.
Data due this week on U.S. oil inventory levels will be delayed by a day to Wednesday and Thursday because of the U.S. Labor Day holiday on Monday.
U.S. crude stockpiles are expected to have declined for a third straight week, a Reuters poll showed on Tuesday.
In a possible sign of an easing to months of tension in the energy-rich Gulf, Iranian state television reported on Wednesday that Tehran would free seven crew members of the detained British-flagged tanker Stena Impero.
The vessel was seized two weeks after Britain detained an Iranian tanker off the territory of Gibraltar which was released in August.
Additional reporting by Florence Tan in Singapore; Editing by Dale Hudson and David Evans