The bullish tone in the market could be capped by China of the upcoming economic figures continue to disappoint
Oil prices have been relatively steady these days, oscillating around the $85 figure for the last two weeks already. Brent crude briefly exceeded $86 during the previous session before retreating marginally, suggesting the oil market is not ready for a sustained ascent at this stage as traders prefer to sell rallies.
This week, the upside bias dominates the market as the US dollar is weakening along with Treasury yields. The pressure intensified after fresh data showed that the US government has revised down the GDP increase to 2.1% last quarter, from the 2.4% pace reported previously. A separate report showed private payroll growth slowed significantly this month.
Brent crude is also backed by tighter US supply and a military coup in Gabon, adding to worries about crude oil supply disruptions. Also on the positive side, oil traders expect Saudi Arabia to roll over a voluntary oil cut of 1 million barrels per day for a third consecutive month into October.
In industry news, the Energy Information Administration report showed that US crude oil stockpiles fell by 10.6 million barrels last week. This is the third straight week of such inventory declines. Gasoline stockpiles declined by 0.214 million barrels while distillate inventories saw a build of 1.235 million barrels.
On the negative side, fresh data from China showed that factory activity in August shrank for a fifth straight month, while non-manufacturing activity hit a new low for the year. The data added to signs that the slowdown in the Chinese economy may not yet have bottomed out.
In the near term, Brent crude could continue to struggle for direction in the $85-$86 region, with upside risks persisting as long as the dollar lacks demand. In a wider picture, the bullish tone in the market could be capped by China of the upcoming economic figures continue to disappoint.