Oil up on expected U.S. oil stock drawdown, but China gloom tempers gain

TOKYO — Oil prices rose in early trading on Tuesday before data later showed a drop in U.S. crude oil and gasoline inventories, although lingering concerns about a slowing Chinese economy limited the rise.

Brent crude was up 10 cents at $84.56 a barrel and U.S. West Texas Intermediate crude traded 9 cents higher at $80.81 a barrel at 0101 GMT. The WTI contract with September expiry rose 11 cents to $80.23 a barrel.

U.S. crude oil and gasoline inventories are expected to have fallen last week, according to a preliminary Reuters poll, as the American Petroleum Institute industry group is due to release data later on Tuesday.

The Energy Information Administration, the statistical arm of the US Department of Energy, is due to release its own data on Wednesday.

The market is also focused on preliminary U.S. PMI data for August and the Federal Reserve’s annual economic symposium in Jackson Hole, both scheduled for later this week, ANZ Research said in a note.

US economic data in recent weeks has bolstered expectations that the Fed will hold rates higher for longer, clouding the outlook for demand for oil and a wide range of consumer goods.

Additionally, the gloomy economic outlook in China, the world’s second-largest oil consumer, also put pressure on oil prices.

Brent crude and U.S. crude oil ended at a loss on Monday, after China’s central bank only moderately cut its one-year lending rate to the disappointment of the market which expected more aggressive stimulus in a context of rapid loss of economic momentum.

“China’s economic weakness is weighing on oil prices and will cap them this year, especially as Beijing appears determined to avoid large-scale fiscal stimulus,” Eurasia Group said in a note.

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