Oil prices steady as US crude draw limits downside

Oil prices steadied on Thursday after four days of declines on investor concern over the global demand outlook, though a drop in U.S. fuel inventories provided a floor.

Brent crude futures gained 35 cents, or 0.5%, to $76.40 a barrel by 1203 GMT. U.S. West Texas Intermediate crude futures edged up by 24 cents, or 0.3%, to $72.17.

“Crude oil prices have stabilised but continue to face downward pressure from ongoing macroeconomic factors. Concerns about China’s economic slowdown have weighed heavily on global demand,” said George Khoury, global head of education and research at CFI Financial Group.

Oil falls after US revises employment data lower

Brent crude has fallen 4% this week while WTI crude has lost 5.8%.

Prices plunged on Wednesday as revisions to jobs data in the United States added to concerns about crude demand after weak economic data out of China last week.

The United States is the world’s biggest oil consumer and China is the world’s largest oil importer.

“The potential weakness in the U.S. economy coupled with a lacklustre recovery in China suggests oil demand growth is to be towards the lower end of expectations,” said Panmure Liberum analyst Ashley Kelty.

Underpinning prices, a U.S. government report on Wednesday showed U.S. crude, gasoline and distillate inventories fell in the week ending Aug. 16 while refinery runs increased.

The larger than expected draw in U.S. stocks limited losses, Kelty added.

Investors are also expecting that the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, a group known as OPEC+, will rein in some voluntary output cuts in October.

Concerns over how OPEC+ production would pan out in the fourth quarter if the cuts are lifted has exacerbated price weakness, though they could be paused or reversed, if needed.

“The downward pressure on prices makes it increasingly likely that OPEC+ will have to scrap their plans for gradually increasing supply from October. Failing to do so, will likely put further pressure on prices,” ING analysts said in a note.

Another supply side factor is easing concern over the Israel-Gaza war as the United States, Israel and Hamas try to hammer out a ceasefire deal, though U.S. diplomatic efforts this week ended without a truce.