SINGAPORE: Oil edged up on Thursday, supported by a drawdown in U.S. crude inventories although weak China data and concerns about excess oil supply capped price gains.
Crude futures rose overnight after government data showed U.S. crude stocks last week fell for a third straight week, but dipped in early Asian trade on Thursday following weak China data.
China’s manufacturing sector contracted for a third straight month in May, hitting the lowest in 13 months, despite earlier reassurance from Chinese Premier Li that the world’s second largest economy can meet its 7 percent growth target this year.
The weak data dragged on prices, analysts from Singapore’s Phillips Futures said in a note, adding that investors will be looking ahead to more data from the U.S. and the eurozone for price direction.
July Brent initially dipped to a low of $64.83 a barrel on Thursday, but recovered to $65.17 by 0346 GMT, a gain of 14 cents on its last settlement.
U.S. crude for July delivery fell to $58.69 a barrel before edging up to $59.07 per barrel, up 9 cents.
Front-month Brent crude futures have seesawed in recent weeks as concerns about a tightening oil market on the one hand and ongoing oversupply on the other take turns in dominating sentiment.
The market has largely held to a $4 price range of $64-68 per barrel since April 23.
Analysts said on Thursday that price volatility was likely to continue, but general oversupply would prevent big price gains.
“Increased focus on the supply side is likely to keep prices in check in the short term,” said ANZ bank.
Part of the problem in gauging the extent of oversupply in global oil markets is that market watchers are struggling to reliably count barrels that are currently being traded and stocked, with some estimates showing over 100 million barrels that are unaccounted for in international statistics.
Despite this, the consensus seems to be that the global market has been oversupplied by between 1.5 million and 2.5 million barrels per day since the start of the year.