Oil steady as downbeat Chinese data offset demand hopes

FILE PHOTO: A view shows oil tanks of Transneft oil pipeline operator at the crude oil terminal Kozmino on the shore of Nakhodka Bay near the port city of Nakhodka, Russia August 12, 2022. REUTERS/Tatiana Meel/File Photo

By Alex Lawler

LONDON - Oil was steady on Monday after Chinese economic data underscoring a bumpy recovery for the world's biggest crude importer offset hopes for a boost to demand from the summer driving season in the northern hemisphere.

Apart from retail sales that beat forecasts due to a holiday boost, the flurry of Chinese data on Monday was largely downbeat. The data followed a survey on Friday showing U.S. consumer sentiment fell to a seven-month low in June.

Global benchmark Brent crude futures were down 3 cents to $82.59 a barrel at 1038 GMT. U.S. West Texas Intermediate crude futures were down 13 cents to $78.32.

Last week, both benchmarks posted their first weekly gain in four weeks on elevated confidence that oil inventories are set to plunge as the summer season gets under way in the northern hemisphere.

"The move higher was not unreservedly convincing," said Tamas Varga of oil broker PVM of last week's gains. "Further weakness is observed this morning due to sluggish Chinese factory activity."

Reports from OPEC and the International Energy Agency last week, although differing on the strength of oil demand growth this year, had supported confidence that inventories would be drawn down in the second half.

Still, BofA analysts said in a report that while the market consensus is for higher oil prices in the third quarter, there is a risk to prices if weak supply and demand balances persist.

"It is not yet clear whether balances will firm enough in the third quarter to tip the market from a large apparent surplus into a deficit that can lift prices," BofA analysts including Francisco Blanch wrote.

On the geopolitical front, concerns of a wider Middle East war lingered after the Israeli military said on Sunday that intensified cross-border fire from Lebanon's Hezbollah movement into Israel could trigger serious escalation.

(Additional reporting by Mohi Narayan in New Delhi and Colleen Howe in Beijing; editing by Jason Neely)