Singapore: Oil pared early losses on Wednesday after China’s economic data signalled that the world’s second-largest fuel consumer was maintaining its growth momentum, partly offsetting views of a well-supplied market and a deteriorating demand outlook.
China’s second-quarter gross domestic product rose 9.5% from a year earlier, exceeding economists’ forecasts for 9.4% growth. The country’s implied oil demand in June rose 1.1% from a year earlier, the slowest growth rate since April 2009.
Brent for August shed 8 cents to $117.67 a barrel at 12:25pm, after falling as much as 86 cents to $116.89, under pressure from an industry report showing a surprise gain in US crude inventories and the downgrade of Ireland’s credit rating.
US crude shed 14 cents to $97.29, after touching a low of $96.53 earlier in the day.
“The oil supply-demand balance is not really tight,” said Tetsu Emori, a fund manager at Tokyo-based Astmax Co Ltd.
“In the current market, people are too pessimistic, looking at the weakness in the US economy and the European debt crisis. I am quite confident that the soft patch in the economy should be over in a few months, with support for Brent at $110.”
US stockpiles of distillates including heating oil and diesel posted a larger-than-expected increase last week, the American Petroleum Institute (API) said late on Tuesday, while Europe’s debt crisis is prompting forecasters to trim their predictions for demand growth.
Crude inventories in top consumer the United States rose 2.3 million barrels last week, the API said, compared to expectations for a decline of 1.8 million.
Distillates climbed 4.8 million barrels, 12 times as much as forecast, while gasoline stocks unexpectedly fell by 1.6 million barrels. Government statistics from the Energy Information Administration will follow on Wednesday at 8:00pm.
A report from MasterCard showed US gasoline demand for the 4 July holiday dropped to the lowest level since 2007 as Americans cut back on driving due to high pump prices.
Still, US crude on Tuesday posted stronger gains than Brent, narrowing the spread between the contracts to below $21 a barrel. The previous session, Brent’s premium had pushed to within pennies of its June 15 record of $23.34.
CONSUMPTION GROWTH TO SLOW?
A deepening European debt crisis and slowing economic growth in China are prompting reductions in forecasts for growth in global oil consumption.
Demand will grow less than previously forecast this year and in 2012 due to a more moderate economic recovery and higher fuel prices, the top U.S. energy forecasting agency said on Tuesday.
In its new monthly outlook, the EIA cut its forecast for 2011 world oil demand growth by 270,000 barrels per day (bpd) to a 1.43 million-bpd increase this year. Oil demand in 2012 will rise 1.58 million bpd, about 10,000 bpd lower than the agency forecast last month.
The forecast came after Opec also said that world oil demand would grow more slowly in 2012 because of a fragile global economy and deepening decline in consumption in Europe.
Fears of escalating euro zone sovereign debt crisis heightened on Tuesday, after Moody’s cut Ireland’s credit rating to junk and warned the country might need a second bailout.
European Union leaders are poised to hold an emergency summit after finance ministers acknowledged for the first time that some form of Greek default may be needed to cut Athens’ debts and to stop contagion spreading to Italy and Spain.
The Organization of the Petroleum Exporting Countries predicted world oil consumption would rise by 1.32 million bpd in 2012, slightly lower than the growth of 1.36 million bpd expected this year.
In other markets, Asian equities, metals and commodity currencies rallied on Wednesday as investors piled into risky assets after China’s economic growth data.