Oil rises on US demand, China data and trade hopes

Oil prices rebounded in early Thursday trade, as investor sentiment turned optimistic following stronger-than-expected economic data from the United States and China, the world’s two biggest oil consumers and signs of easing global trade tensions. The reversal comes after oil benchmarks posted slight losses in the previous session.

As per Reuters, Brent crude futures rose 27 cents, or 0.39 per cent, to $68.79 a barrel at 0000 GMT, while US West Texas Intermediate (WTI) crude was up 31 cents, or 0.47 per cent, to $66.69. Both benchmarks had slipped more than 0.2 per cent on Wednesday.

US inventory draw signals strong demand

A key driver behind the rebound was the sharp decline in US crude stockpiles. According to the US Energy Information Administration (EIA), crude inventories fell by 3.9 million barrels last week to 422.2 million barrels, significantly more than the 552,000-barrel draw forecast by analysts.

This larger-than-expected drop suggests stronger refinery activity and tighter supply, reflecting growing domestic demand. “There is some support from the favourable margin environment associated with the refining sector. Product spreads remain relatively wide in all the regions,” said John Paisie, president of energy consultancy Stratas Advisors, as quoted by Reuters. However, the rise in gasoline and diesel inventories tempered bullish sentiment, indicating that demand for refined products remains patchy.

Fed report mixed, but demand outlook steady

The Federal Reserve’s latest Beige Book, a snapshot of current US economic conditions, indicated moderate improvement in recent weeks. But the outlook remained “neutral to slightly pessimistic”, with businesses citing rising costs due to import tariffs.

Still, the positive activity data helped stabilise oil sentiment, particularly amid fears that prolonged rate pressures and protectionism could curb industrial fuel use.

China’s crude throughput rises despite slowing economy

China’s economic growth slowed in the second quarter, but not as drastically as feared, easing concerns over a deep slowdown. As per Reuters, part of the resilience was attributed to front-loaded activity to beat US tariffs. The most encouraging signal for oil markets was China’s June crude oil throughput, which rose 8.5 per cent from a year earlier, indicating firm underlying fuel demand.

This uptick in refining points to stronger energy consumption, even as trade headwinds persist.

Trump’s trade gestures boost confidence

Adding to the market’s buoyancy was a slight thaw in trade tensions. As reported by Reuters, US President Donald Trump this week lifted the ban on AI chip exports to China and announced a trade deal with Indonesia. He also signalled progress on agreements with India and possibly Europe.

Trump even expressed optimism over potential cooperation with Beijing on illicit drug controls, signalling a broader effort to revive dialogue with key partners. While high tariffs continue to pose risks to global demand, the easing rhetoric has temporarily soothed market nerves, offering support to crude prices, at least in the short term.

Despite global uncertainties, oil markets found support from stronger-than-expected economic data, falling US crude stocks, and glimmers of diplomatic progress on trade. But with gasoline builds rising and tariff risks still looming, the rebound remains on a cautious footing.