Oil prices rose on Tuesday, steadying from recent losses as markets bet that worsening growth in China will invite more stimulus measures from the government, while focus also turned to readings on U.S. crude supplies.
Crude markets logged steep losses in the prior session after data showed that economic growth in China- the world’s largest oil importer- slowed substantially in the second quarter.
Monday’s losses pulled oil prices well off recent highs, with both Brent and WTI losing key levels- $80 a barrel and $75 a barrel, respectively.
Brent oil futures rose 0.2% to $78.69 a barrel, while West Texas Intermediate crude futures rose 0.3% to $74.28 a barrel by 21:42 ET (01:42 GMT) on Tuesday.
The resumption of production at major Libyan oilfields also pressured crude markets, denting some bets that production in the country would be offline for longer.
But weakness in the dollar, which sank to 15-month lows in July, helped limit bigger losses in oil prices.
Data released on Monday showed that China’s gross domestic product slowed in the second quarter from a strong performance in the first.
A post-COVID economic recovery in the world’s largest oil importer now appeared to be running out of steam.
Still, markets are now pricing in the potential for more stimulus measures from Beijing, as the government moves to shore up economic growth.
Local media reports said that the People’s Bank of China could potentially cut reserve requirements in the third quarter, unlocking more impactful liquidity to support the economy.
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The bank had last cut its reserve requirement ratio in March this year, just a few months after the government relaxed most anti-COVID restrictions.
But while crude imports to China have remained strong despite slowing growth, fuel demand in the country has struggled to recover from COVID-era lows amid slowing business activity.
Investors were now awaiting more signals from weekly U.S. inventory data, due from the American Petroleum Institute and Energy Information Administration on Tuesday and Wednesday, respectively.
The data is expected to show a mild decline in stockpiles after a substantially bigger-than-expected build in the prior week.
A key measure of U.S. fuel demand had disappointed markets last week, showing that gasoline consumption dropped over the prior week, which was uncharacteristic of the demand-heavy summer season.
Extreme weather conditions in the country are also expected to have hurt fuel consumption, as different parts of the country grapple with flooding, wildfires and extreme heat.
