Picture: REUTERS
Picture: REUTERS

London — Oil prices fell on Wednesday on disappointing economic data from China and Europe and a rise in US crude inventories, partly erasing the previous session’s sharp gains after the US said it would delay tariffs on some Chinese products.

Brent crude was down 49c, or 0.8%, at $60.81 a barrel at 9.54am GMT, after rising 4.7% on Tuesday, the biggest percentage gain since December. US West Texas Intermediate (WTI) crude future was down 73c, or 1.3%, at $56.37 a barrel, having risen 4% the previous session, the most in just more than a month.

China reported a raft of unexpectedly weak data for July, including a surprise drop in industrial output growth to a more than 17-year low, underlining widening economic cracks as the trade war with the US intensifies.

“This morning’s Chinese industrial production came in below expectations confirming our expectation that the late-cycle dent likely becomes deeper before year end,” Norbert Rücker of Swiss bank Julius Bär said, referring to late-cycle phase in economies that is characterised by slowing growth. “Oil demand should continue to soften,” he added.

The global slowdown amplified by tariff conflicts and uncertainty over Brexit also shrank European economies. A slump in exports sent Germany’s economy into reverse in the second quarter, data showed.

The eurozone’s GDP also barely grew in the second quarter of 2019.

Profit taking after Tuesday’s sharp gains also weighed on crude prices on Wednesday, analysts said.

Benchmark crude prices surged on Tuesday after US President Donald Trump backed off his September 1 deadline for 10% tariffs on some products affecting about half of the $300bn target list of Chinese goods.

“While Brent crude has recovered back above $60 a barrel, the technical outlook for WTI looks somewhat better after once again managing to find support above $50 a barrel,” said Ole Hansen, head of commodity strategy at Saxo Bank. “The range-bound behaviour, however, looks set to continue with focus on US-China trade talks and continued production restraint from oil cartel Opec, led by Saudi Arabia.”

Data from industry group the American Petroleum Institute (API) showed US crude stocks unexpectedly rose last week.

Crude inventories increased by 3.7-million barrels to 443-million, compared with analyst expectations for a decrease of 2.8-million barrels, the API said.