LONDON: Brent crude oil held near $86 a barrel on Tuesday on news of robust Chinese oil demand, although gains were capped by oversupply and concerns over the health of the rest of the global economy.
Implied oil demand in the world's largest energy consumer jumped 6.2 percent in September from August to 10.3 million barrels per day, the highest since February.
China's factory output also beat expectations, rising 8 percent in September from a year earlier and boosting hopes of a strengthening recovery.
Data on Tuesday showed China's economy expanded by 7.3 percent in the third quarter, above forecasts but its slowest pace since the global financial crisis.
"Oil is up in reaction to the Chinese demand figures," said Tamas Varga, analyst at London brokerage PVM Oil Associates.
"But this is a rally that should be sold into," Varga said. "The rise in implied Chinese oil demand may have more to do with filling stockpiles. Chinese companies have been buying crude oil because it has been cheap."
Brent was up 55 cents a barrel at $85.95 by 1018 GMT, well above a near four-year low reached last week, but still down more than a quarter since June.
U.S. crude was also up 55 cents at $83.26.
"The Chinese data was not as dire as was expected," said Christopher Bellew, a trader with Jefferies Bache. "But looking forward, I think we'll see more pressure to the downside. These lower prices will take a while to have any impact on supply."
The gradual slide in Chinese growth added to worries about the economic outlook which have led the International Energy Agency to slash its world oil demand growth forecast for next year.
Citi cut its price forecasts for Brent and U.S. crudes to $92 and $83, respectively, for the fourth quarter of this year. This follows downward revisions by BNP Paribas and Bank of America Merrill Lynch last week.
Some members of the Organization of the Petroleum Exporting Countries (OPEC) have indicated that the group is unlikely to ease the oil supply glut by cutting output ahead of its Nov. 27 meeting. Others are preparing 2015 budgets with lower oil prices.
While Libya supports an output cut, other African members seem less keen.
The oil price slump could also affect U.S. shale production. About one third of production would be uneconomical at oil prices below $80 per barrel, analysts at Bernstein Research said.
Comments
Comments are closed for this article.