Picture: REUTERS
Picture: REUTERS

London — Oil prices recovered some ground on Wednesday, boosted by a wider market pick-up on positive news from China’s services sector, after three days of losses on fears about a weakening global economy.

Brent crude was up 15c, or 0.26%, at $58.41 a barrel by 8.50am GMT, while US West Texas Intermediate(WTI)  futures gained 24c, or 0.44%, at $54.18 a barrel.

US data released on Wednesday showed manufacturing activity contracted in August for the first time in three years, while eurozone activity shrank for a seventh month.

Global markets rebounded on Wednesday after a private survey showed that activity in China’s services sector expanded at the fastest pace in three months in August as new orders rose, prompting the biggest increase in hiring in more than a year.

China is the world’s second-largest oil consumer and largest importer.

However, on Tuesday, US President Donald Trump warned he would be “tougher” on Beijing in a second term if trade talks dragged on, compounding market fears that trade disputes between the US and China could trigger a US recession.

“The bullish bandwagon seen earlier this year will not be making another appearance,” Stephen Brennock of oil broker PVM said. “Spearheading these dimming prospects [are] ... cooling global economic activity and intensifying trade tensions. The world economy is slowing and nowhere is this pullback in activity more apparent than in the manufacturing sector.”

Citi cut its Brent forecasts for the third and fourth quarters by about $10 a barrel to $62 and $64, respectively, and expects the benchmark to fall to $53 by the end of 2020. Brent is about 23% lower than its peak in April.

“[In 2020], the curtailment of demand growth coming from lower GDP growth expectations and continuation of the US-China trade war could shave more oil demand from the market,” Citi analysts wrote.

Data due this week on US oil inventory levels will be delayed by a day to Wednesday and Thursday because of the US Labor Day holiday on Monday.

US crude stockpiles are expected to have declined for a third straight week, a Reuters poll showed on Tuesday.

On the supply side, Venezuela’s oil exports fell in August to their lowest in 2019, internal reports and Refinitiv Eikon data showed, following tougher US sanctions.

Reuters