July 19 (Reuters) – Global oil prices edged down on
Wednesday, after opening higher at the start of Asian trade, as
markets weighed U.S. demand concerns against China’s pledge to
support economic growth, tighter Russian supply and declining
Brent futures slipped 22 cents to $79.41 a
barrel at 0403 GMT, while U.S. West Texas Intermediate (WTI)
crude fell 32 cents to $75.43 per barrel.
“There are many positive drivers for oil prices now on
the demand-supply front, and while we expect WTI to rebound to
near $80 a barrel, this does not signify a bull market because
global central banks’ dovish stance still represents a retreat
of risk appetite,” said CMC Markets analyst Leon Li.
“With the Fed likely to raise interest rates for the
last time in July, concerns about U.S. demand that will limit
oil price gains are likely to remain.”
Economists are still concerned that U.S. inflation might
not come down quickly enough even with rate hikes. A Reuters
poll showed that core inflation, which strips out food and
energy prices, will be only slightly lower or remain around the
current level of just under 5% by the end of the year.
However, on the positive front, China’s top economic planner
pledged on Tuesday that it would roll out policies to “restore
and expand” consumption in the world’s second-largest economy,
which could boost oil demand, as consumers’ purchasing power
“So far, as long as we assume the stimulus in China is going
to be successful, oil balances will tighten significantly – even
if Europe was to fall in a mild recession,” said Rystad Energy’s
North America research director Claudio Galimberti.
This means prices may still break through the higher end of
the current market’s range at $80 a barrel, he added.
On the supply side, Russia will reduce its oil exports
by 2.1 million metric tons in the third quarter in line with
planned voluntary export cuts of 500,000 barrels per day in
August, according to the energy ministry.
Price support also came from an expected drawdown in
U.S. stocks, after data from the American Petroleum Institute,
an industry group, showed crude oil, gasoline and distillate
inventories all fell last week.
Traders will be watching for confirmation of the stocks
drawdowns in data from the U.S. government’s Energy Information
Administration on Wednesday at 10:30 a.m. EDT (1430 GMT).
(Reporting by Katya Golubkova in Tokyo and Trixie Yap in
Singapore; Editing by Lincoln Feast and Sonali Paul)