SINGAPORE (Reuters) – Oil prices recovered some ground on Wednesday after touching their lowest in close to a month during the previous session on concerns that a weakening global economy could depress demand.
FILE PHOTO: Pumpjacks are seen during sunset at the Daqing oil field in Heilongjiang province, China August 22, 2019. REUTERS/Stringer
Brent crude LCOc1 was up 12 cents, or 0.21%, at $58.38 a barrel by 0425 GMT, while U.S. West Texas Intermediate futures CLc1 gained 20 cents, or 0.37%, at $54.14 at barrel.
Oil prices sunk to a nearly one-month low on Tuesday following data that showed U.S. manufacturing activity in August contracted for the first time in three years and euro zone manufacturing activity contracted for a seventh month in August.
But global markets bounced on Wednesday after a private survey showed that activity in China’s services sector expanded at the fastest pace in three months in August as new orders rose, prompting the biggest increase in hiring in over a year.
China is the world’s second-largest oil consumer and largest importer.
“Given the tumble that we saw overnight it’s probably people locking in gains on shorts or perhaps establishing new longs in anticipation we might get an announcement from Beijing on setting a date for trade talks with the United States),” said Michael McCarthy, chief market strategist at CMC Markets in Sydney.
A short position is when an investor sells futures in expectations of falling prices while a long position is when one buys futures to profit from rising prices.
U.S. President Donald Trump on Tuesday warned he would be “tougher” on Beijing in a second term if trade talks dragged on, compounding market fears that ongoing trade disputes between the United States and China could trigger a U.S. recession.
“Market participants are becoming increasingly worried about recession risk,” said Stephen Innes, a market strategist at AxiTrader.
“Moreover, given that tariffs present a significant threat to U.S. growth and in turn, the health of the global economy, oil prices will remain under pressure especially if trade and tariff war shows no sign of abating.”
Data due this week on U.S. inventory levels will be delayed by a day to Wednesday and Thursday because of the U.S. Labor Day holiday on Monday.
U.S. crude oil stockpiles likely declined for a third straight week, a preliminary Reuters poll showed on Tuesday.
On the supply side, Venezuela’s oil exports fell in August to their lowest level in 2019, internal reports and Refinitiv Eikon data showed, following tougher U.S. sanctions.
Reporting by Jessica Jaganathan and Florence Tan; editing by Christian Schmollinger