Oil edges higher amid mixed US economic data and China stimulus talk

China will introduce more effective policies to boost consumption, government official says

An oil rig in Midland, Texas. US crude stocks, an indicator of fuel demand, fell by 797,000 barrels last week. Bloomberg

Oil prices edged higher on Wednesday amid mixed US economic data and talk of a stimulus in China, the world’s second-largest economy.

Brent, the benchmark for two thirds of the world’s oil, was trading 0.83 per cent higher at $80.29 a barrel at 5.38pm UAE time while West Texas Intermediate, the gauge that tracks US crude, was up 0.66 per cent at $76.25.

On Tuesday, Brent settled 1.44 per cent higher at $79.63 a barrel while WTI was up 2.16 per cent at $75.75.

US industrial production declined 0.5 per cent in June for a second straight month but expanded by 0.7 per cent at an annual rate for the second quarter, the US Federal Reserve said on Tuesday.

Meanwhile, manufacturing output dropped by 0.3 per cent last month but rose 1.5 per cent in the second quarter, the central bank said.

US retail sales rose 0.2 per cent in June, down from an upwardly revised 0.5 per cent month-over-month growth rate in May, according to the Commerce Department.

Control group sales, an input used to estimate gross domestic product, grew by 0.6 per cent last month, up from 0.3 per cent in May, the data showed.

“The data points to resilience in consumer spending although momentum has slowed,” said Kenny Fisher, market analyst at Oanda.

“The retail sales report did not change expectations with regard to rate policy, with the Fed expected to raise rates in July and take a pause in September.”

Last month, the Fed hit pause on raising interest rates for the first time since it started its monetary tightening cycle in March 2022 as it assesses the impact on the economy.

It signalled that it would resume raising rates again this year, if needed. The next Fed meeting will be on July 25 and 26.

The chance of a contraction in the US over the next 12 months has come down to 20 per cent, from an earlier estimate of 25 per cent, Goldman Sachs said in its latest report.

“The main reason for our cut is that the recent data reinforced our confidence that bringing inflation down to an acceptable level will not require a recession,” the investment bank said.

Meanwhile, China, the world’s biggest crude importer, may introduce stimulus measures to revive sagging economic growth.

The country will formulate and introduce more effective policies to restore and expand consumption as soon as possible, Jin Xiandong, a National Development and Reform Commission official reportedly told the Global Times.

Efforts should also be made to increase residents' incomes through various channels, stabilise employment and expand more scenarios for consumption, Mr Jin said.

China’s GDP expanded by an annual 6.3 per cent from April to June, after growing by 4.5 per cent in the previous three months, as the country reopened after removing Covid-19 restrictions, according to the National Bureau of Statistics.

However, the pace of growth in the second quarter missed the 7.1 per cent estimate of economists polled by Bloomberg and the 7.3 per cent forecast of those surveyed by Reuters.

Quarterly, GDP growth was only 0.8 per cent between April and June, compared with the previous three months.

Inflation in the UK fell to 7.9 per cent in the year to June, down from 8.7 per cent in May, according to the Office for National Statistics.

On a monthly basis, the consumer prices index (CPI) rose by 0.1 per cent in June, compared with a rise of 0.8 per cent in the same month last year.

“Even with a softer-than-expected figure, inflation in Britain remains high and stickier than in other western economies, and that keeps odds for further [Bank of England] action sensibly more hawkish than for other major central banks,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

Higher interest rates affect economic growth, lowering crude demand.

US crude stocks, an indicator of fuel demand, fell by 797,000 barrels last week, according to the American Petroleum Institute.