SINGAPORE, April 25 (Reuters) – Oil prices held steady on Tuesday as investors weighed strong holiday travel in China that could boost fuel demand against the prospect of rising interest rates elsewhere, slowing economic growth.
Brent crude fell 3 cents to USD 82.70 a barrel at 0620 GMT, while US West Texas Intermediate crude also eased 3 cents to USD 78.73 a barrel.
Oil futures had risen more than 1% on Monday on optimism that holiday travel in China would increase fuel demand in the world’s second-biggest economy.
for trips abroad during the upcoming May Day holiday point to a continued recovery in travel to Asian countries. Still, the numbers remain far off pre-COVID levels, with long-haul airfares soaring and not enough flights available.
“Investors expressed optimism that Chinese holiday travel would boost fuel demand in the world’s largest oil importer,” said Leon Li, an analyst at CMC Markets.
“In addition, expectations for a slowdown in US gross domestic product growth in the first quarter prompted a pullback in the US dollar index yesterday, supporting gains in oil prices.”
A weaker US dollar can help global demand for oil by making it cheaper for holders of foreign currencies in other countries.
However, investors remain wary about central banks in the United States, Britain and the European Union potentially raising interest rates further to curb inflation, which could slow economic growth and dent energy demand.
The, the Bank of England and the European Central Bank are all expected to raise rates when they meet in the first week of May.
“(There is a) still hawkish Federal Reserve, recession predictions in the West in the second half of the year, potential for lower than expected oil demand recovery in China and still robust Russian oil exports despite the official guidance of a 500,000 barrels per day (bpd) cut,” said Suvro Sarkar, energy sector team lead at DBS Bank.
“However, we believe oil prices will bounce back to USD 85 per barrel levels and above again in coming months as the OPEC+ cut kicks in and more evidence of oil demand growth from China comes in.”
Russia’s Deputy Prime Minister Alexander Novak said in February the country would reduce production by 500,000 bpd in, then in early April promised to cuts until the end of the year.
Trading and shipping sources however say thatfrom Russia’s western ports in April will rise to the highest since 2019, above 2.4 million bpd, despite Moscow’s pledge to cut output.
Meanwhile, investors on Tuesday awaited industry data on US oil stockpiles. Analystsby Reuters expected the data to show US crude inventories fell by about 1.7 million barrels in the week to April 21.
US government data on inventories is due on Wednesday.
(Reporting by Stephanie Kelly and Emily Chow in Singapore; Editing by Sonali Paul, Kenneth Maxwell and Lincoln Feast.)
This article originally appeared on reuters.com