A worker checks the valve of an oil pipe at the Lukoil company-owned Imilorskoye oilfield outside the Siberian city of Kogalym, Russia. Picture: REUTERS/SERGEI KARPUKHIN
A worker checks the valve of an oil pipe at the Lukoil company-owned Imilorskoye oilfield outside the Siberian city of Kogalym, Russia. Picture: REUTERS/SERGEI KARPUKHIN

Singapore — Oil prices recovered some ground on Wednesday after touching their lowest in close to a month during the previous session on the concern that a weakening global economy could depress demand.

Brent crude was up 12c, or 0.21%, at $58.38 a barrel by 4.25am GMT, while US West Texas Intermediate (WTI) futures gained 20c, or 0.37%, at $54.14 a barrel.

Oil prices sunk to a nearly one-month low on Tuesday following data that showed US manufacturing activity in August contracted for the first time in three years and eurozone manufacturing activity contracted for a seventh month in August.

But global markets bounced 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 over a year.

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

“Given the tumble that we saw overnight it’s probably people locking in gains on shorts or perhaps establishing new longs in anticipation we might get an announcement from Beijing [on setting a date for trade talks with the US),” said Michael McCarthy, chief market strategist at CMC Markets in Sydney.

A short position is when an investor sells futures in expectations of falling prices while a long position is when one buys futures to profit from rising prices.

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

“Market participants are becoming increasingly worried about recession risk,” said Stephen Innes, a market strategist at AxiTrader.

“Moreover, given that tariffs present a significant threat to US growth and in turn, the health of the global economy, oil prices will remain under pressure especially if trade and tariff war shows no sign of abating.”

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

US crude oil stockpiles likely declined for a third consecutive week, a preliminary Reuters poll showed on Tuesday.

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

Reuters