London: Oil prices fell, turning negative after earlier highs, as the focus shifted from robust demand from China to signs that the world’s second-largest economy might be cooling.
ICE Brent crude futures were 4 cents lower at $117.59 a barrel by 1:57pm, having risen to as high as $118.43 earlier.
US crude dropped by 33 cents to $103.55.
China’s implied oil demand, a combination of crude oil throughput and net imports of refined oil products, was at 9.32 million barrels per day (bpd) in April, Reuters calculations showed, up 8.8 percent from a year earlier and the third highest ever.
But China’s inflation eased in April to 5.3% and other data including industrial output and loans suggested the world’s second-biggest economy might be cooling, with less need for further aggressive monetary tightening.
“Inflation has cooled slightly,” Thorbjorn Bak Jensen with Global Risk Management in Denmark said. “But there is still heavy growth in retail sales and production.”
Some analysts said the dip was driven by short-term profit-taking and technical indications to sell.
Mike Witter with Societe Generale expected volatility would remain in the oil market.
“Macro data from the U.S., Europe and China has been decidedly mixed in the last two weeks, helping to trigger fear and extreme volatility,” he said in a research note.
US GASOLINE, FLOOD
With the summer US driving season soon to start, investors are focusing on the flood along the Mississippi River, which threatened to disrupt oil refineries amid falling inventories of gasoline in the world’s top gas guzzling market.
“US gasoline inventories have been coming off, so we still see healthy demand despite concerns of higher commodity prices slowing consumption,” said Serene Lim, an ANZ Bank oil analyst based in Singapore.
US gasoline stocks fell by 1.8 million barrels in the week to May 6, the American Petroleum Institute said late on Tuesday, versus an expected drop of 200,000 barrels. Inventories are now nearly 11 million barrels below levels this time last year.
Later on Wednesday, the US government will release its own oil figures. Analysts expect the official date to show a fall in gasoline stocks for the 12th consecutive week.