A VLCC oil tanker is seen at a crude oil terminal in Ningbo Zhoushan port, east China’s Zhejiang province, 16 May 2017. Picture taken May 16, 2017. REUTERS/Stringer /File Photo
SING`ORE, Aug 15 (Reuters) – Oil prices edged higher on Tuesday as China unexpectedly cut interest rates for the second time in three months to shore up a faltering economic recovery, but sluggish economic data out of the country dampened gains.
Brent crude futures were up 11 cents, or 0.1%, to trade at $86.32 a barrel by 04:14 GMT. U.S. West Texas Intermediate crude rose 7 cents, or 0.1%, to $82.57 a barrel.
Prices rose after the People’s Bank of China (PBOC) lowered the interest rate on 401 billion yuan (US$55.25 billion) one-year medium-term lending facilities (MLF) to some financial institutions by 15 basis points from 2.65 to 2, 50% had lowered %.
The cash injection was intended to counteract factors such as tax payments to “keep the liquidity of the banking system reasonably adequate,” the PBOC said in an online statement.
“The market was expecting the PBoC to wait until September before easing rates again, and today’s cuts indicate increasing concern from authorities about the state of the macro economy,” said Robert Carnell, regional head of research at ING Bank , in a note.
China’s industrial production and retail sales data on Tuesday showed the economy has slowed further over the past month, adding pressure on already flagging growth and prompting authorities to cut interest rates in a bid to boost the economy.
Despite the weak macroeconomic data, China’s oil appetite has been resilient. The country’s refining throughput rose 17.4% yoy in July as refiners kept production high to meet demand for domestic summer travel and benefit from high regional profit margins by exporting fuel.
Japan’s economy grew significantly faster-than-expected from April to June, which also supported oil prices as buoyant auto exports and tourist arrivals helped offset the strain of a slowing post-COVID consumer recovery.
Meanwhile, oil and natural gas production from key US shale-producing regions is likely to fall to the lowest level since May for the second straight month in September, data from the Energy Information Administration showed on Monday.
Declining US production could exacerbate global oil supply shortages as the Organization of Petroleum Exporting Countries and its allies, known as OPEC+, cut production.
Reporting by Muyu Xu and Katya Golubkova; Edited by Sonali Paul
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