London — Oil slipped on Wednesday, adding to a decline in the previous session, as a rise in US crude inventories and global recession worries edged out optimism for a demand recovery in China.
The price of crude has rallied in 2023 on the ending of China’s Covid-19 controls and hopes that the rise in US interest rates will soon taper off.
Still, some analysts said the speed of China’s actual demand rebound looks uncertain.
“Whether or not oil prices can resume their march higher will depend on how quickly China’s crude demand bounces back this quarter,” said Stephen Brennock of oil broker PVM. “In the meantime, attention is shifting to the state of US oil inventories.”
Brent crude were down 6c to $86.07 a barrel by 8.20am GMT after declining 2.3% in the previous session.
West Texas Intermediate (WTI) US crude slipped 40c, or 0.5%, to $79.73, after a 1.8% drop on Tuesday.
Weighing on prices was a report on Tuesday that US crude stocks rose by about 3.4-million barrels in the week ended January 20, according to market sources citing American Petroleum Institute figures.
Also weighing on oil were concerns about an economic slowdown. US business activity contracted in January for the seventh straight month, figures showed on Tuesday.
Official inventory data from the US Energy Information Administration is out at 3.30pm GMT.
Elsewhere on the supply side, volume should remain steady from Opec+. An Opec+ panel is likely to endorse the group’s current policy at a February 1 meeting, five Opec+ sources said on Tuesday.
Opec+ in October decided to trim output by 2-million barrels per day from November through 2023 on a weaker economic outlook.
Oil’s rally in 2023 has brought Brent crude close to $90 and some analysts say prices could reach that point.
“The current momentum in the price action supports the theory that we could retest this price level,” said Naeem Aslam, an analyst at Avatrade.
“However, we still need a lot of conviction among traders to reach that.”