Oil lifts slightly due to easing inflation in eurozone

London — Oil prices edged up on Tuesday helped by a drop in eurozone inflation but were pinned below $90 a barrel on weak Chinese economic data and as the conflict in the Middle East remained contained.

December Brent crude futures, were 85c, or 0.97%, higher at $88.30 a barrel by 11.36am GMT ahead of their expiry later on Tuesday.

The more heavily traded January contract climbed 59c, or 0.68%, to $86.94. US West Texas Intermediate crude rose 61c, or 0.74%, to $82.92.

Both Brent contracts traded $1 higher earlier in the day.

Eurozone inflation was at its lowest level in two years in October, falling to 2.9% from 4.3% in September, according to Eurostat’s flash estimate.

Meanwhile, weaker-than-expected manufacturing and non-manufacturing activity data in China stoked fears of slowing fuel demand from the world’s number two oil consumer.

Its official purchasing managers’ index missed a forecast and dipped back below the 50-point level separating contraction from expansion.

China’s fourth quarter fuel demand is expected to rise 10% year-on-year, PetroChina president Huang Yongzhang said on Tuesday.

Oil prices had fallen on Monday in part “because Israel’s ground offensive in the Gaza Strip is so far proceeding only gradually and has thus not yet sparked any further escalation of the Middle East conflict,” Commerzbank analysts said.

But investors continue to be wary of other countries in the region entering the conflict.

“Given the recalcitrant attitude of the warring parties and the potentially protracted and explosive nature of the ongoing conflict, the Middle East premium will likely put a floor under the prices in the foreseeable future,” PVM’s Tamas Varga added.

Israeli Prime Minister Benjamin Netanyahu dismissed calls for a halt to fighting to ease a humanitarian crisis on Tuesday, as Israeli forces attacked Hamas in the network of tunnels under the Palestinian exclave.

Markets were also keeping a close eye on a US central bank meeting ending on Wednesday, despite a high likelihood it would keep interest rates steady, according to a poll by CME’s Fedwatch tool. 

Reuters