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Oil steadies on China growth as Middle East tensions simmer

Published by Uma Rajagopal

Posted on April 16, 2024

Featured image for article about Top Stories

By Alex Lawler

LONDON (Reuters) -Oil steadied on Tuesday with support from data showing China’s economy grew faster than expected and Middle East tensions but weighed by concern that U.S. interest rates may stay higher for longer and reduce demand.

Official data from China showed gross domestic product in the world’s biggest oil importer grew 5.3% in the first quarter, year on year, comfortably beating analysts’ expectations.

Brent futures for June delivery rose 7 cents, or 0.1%, to $90.17 a barrel by 0801 GMT. U.S. crude for May was up 6 cents, or 0.1%, to $85.47.

Other Chinese indicators, including real estate investment, limited gains, as did stronger-than-expected U.S. retail sales for March further reinforcing expectations the U.S. Federal Reserve is unlikely to rush to cut interest rates.

“The balancing act between sticky inflation, a hesitant Fed and the gradual move towards a full-blown regional conflict keeps oil…in its range,” said Tamas Varga of oil broker PVM.

“Material disruption to oil production, supply or shipping must take place to approach the $100 a barrel milestone. Currently such a development appears implausible.”

Concern that Iran would respond to the strike on its embassy compound in Damascus helped send Brent on Friday to $92.18, the highest since October.

Prices, though, fell on Monday after Iran’s weekend attack on Israel proved to be less damaging than anticipated, easing concerns of a quickly intensifying conflict that could displace crude barrels.

“As the risk to supply is waning and a military response from Israel looks less likely as more time passes, prices are holding steady,” said Rystad Energy’s Jorge León. “Tensions are high, and either party’s next moves are hard to predict.”

Iran will respond to any action against its interests, President Ebrahim Raisi said on Tuesday, according to the Iranian Student News Agency, a day after Israel warned it will respond to Tehran’s weekend drone and missile attack.

Iran produces more than 3 million barrels per day of crude oil as a major producer within the Organization of the Petroleum Exporting Countries (OPEC).

(Additional reporting by Laura Sanicola in Washington and Sudarshan Varadhan in Singapore; editing by Jason Neely)