By Shariq Khan
NEW YORK (Reuters) -Oil prices edged higher for a second straight session on Tuesday as traders played down hopes for a ceasefire in the Middle East and focused on signs of improving demand from China, lifting market balances could tighten in the coming months.
futures for December rose $1.75, or 2.4%, to settle at $76.04 a barrel. U.S. West Texas Intermediate crude futures for November rose $1.53, or 2.2%, to $72.09 a barrel and expired after Tuesday’s settlement.
Beijing’s recent efforts to revive its slowing economy have led some analysts to raise expectations for oil demand in the world’s largest oil-importing country. Weak demand from China, amid the rapid electrification of China’s vehicle fleet, has weighed heavily on oil prices in recent months.
Both Brent and WTI rose almost 2% on Monday, recouping some of last week’s more than 7% decline after China announced interest rate cuts.
Any improvement in economic growth should also boost fuel consumption. Still, it may take some time for the stimulus efforts to feed into oil demand, says StoneX analyst Alex Hodes.
“We may have seen the bottom in demand, but I don’t know if there is much consensus on how much this can improve the situation,” Hodes said.
In a note to clients, Goldman Sachs analysts said Monday that their China demand tracker rose by about 100,000 barrels per day last week to the highest level in six months, partly because the country’s industrial production and retail sales exceeded expectations.
China on Tuesday set crude oil import quotas for next year at 257 million tons (5.14 million barrels per day), up from this year’s 243 million tons.
Global oil inventories point to a supply shortage in the fourth quarter, which should support prices in the near term, Hodes said.
Global oil inventories stood at about 1.24 billion barrels last week, down 5 million barrels from last year, according to StoneX’s analysis of data from major trading centers.
Stocks rose 1.64 million barrels last week, while gasoline and distillate fuel fell a combined 3.5 million barrels, market sources said, citing American Petroleum Institute figures on Tuesday. Analysts polled by Reuters expect crude inventories to rise by 300,000 barrels.
Oil prices fell slightly in low-volume after-hours trading, with Brent crude trading at $75.51 per barrel.
Government data on U.S. inventories will be released Wednesday at 10:30 a.m. ET (1430 GMT). [EIA/S]
In the Middle East, US Secretary of State Antony Blinken met with Israeli Prime Minister Benjamin Netanyahu in the first major attempt at a ceasefire in the Middle East since Israel assassinated the leader of Hamas last week. Washington hopes this will provide a chance for peace.
Blinken has made little progress toward a ceasefire in his 11 previous visits to the region since the Gaza war broke out, so there is skepticism among investors that this will be different, says Bob Yawger, director of energy futures at Mizuho.
Israel has so far shown no signs of relenting in its campaigns in Gaza and Lebanon, while Iran-linked Hezbollah has ruled out negotiations as the battle with Israel continues.
