NEW YORK: Oil prices edged lower on Wednesday as investors reassessed whether China’s latest stimulus plans will be sufficient to boost its economy and spur fuel demand.
Still, falling crude inventories in the United States provided some support.
Brent crude futures were down $0.55, or 0.73%, at $74.62 a barrel at 11:30 a.m. EDT (1530 GMT). U.S. West Texas Intermediate crude was down $0.69, or 0.96%, at $70.87 per barrel.
Despite a slew of monetary support measures announced by China’s central bank on Tuesday, the boldest since the pandemic, analysts warned that more fiscal help was needed to boost activity in the world’s largest crude importer.
“Concerns lingered that more fiscal support would be needed to boost confidence in the Chinese economy. This uncertainty raised doubts about sustained demand growth, weighing on crude prices,” said George Khoury, global head of education and research at CFI Financial Group.
Oil prices rose by about 1.7% on Tuesday after China announced sweeping interest rate cuts and more funding. But credit demand is already extremely weak, and the steps did not include any measures to shore up real economic activity.
Oil prices climb 2% on China stimulus, Middle East conflict
“Market participants (are) questioning if the latest stimulus measures by the People’s Bank of China are enough to support Chinese economic and oil demand growth,” said UBS analyst Giovanni Staunovo.
Crude inventories in the U.S., meanwhile, fell by 4.5 million barrels to 413 million barrels in the week ended Sept. 20, the Energy Information Administration said, compared with analysts’ expectations in a Reuters poll for a 1.4 million-barrel draw. Gasoline and distillate inventories also declined last week.
“The trend of falling supplies is getting too big to ignore. We hear how bad demand can be and have mixed signals,” said Phil Flynn, an analyst with Price Futures Group. “The weakness of demand doesn’t fit with this falling inventory situation,” he added.
The intensifying conflict between Iran-backed Hezbollah in Lebanon and Israel also supported crude prices, with cross-border rockets launched by both sides increasing fears of a wider conflict.
Although Iran’s leadership has shown restraint, an attack is probably on the cards in order to save face, but without enraging its European allies and disrupting the main oil trade routes, said Achilleas Georgolopoulos, investment analyst at brokerage XM.
Meanwhile, a hurricane threatening the U.S. Gulf Coast has changed course towards Florida and away from oil and gas-producing areas near Texas, Louisiana and Mississippi.
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