By Ambar Warrick
Investing.com -- Oil prices moved little in early Asian trade on Thursday as markets awaited key business activity data from China for more cues on the world’s largest crude importer, although signs of tightening supplies saw crude prices trading higher for the week.
Focus now turns to Chinese manufacturing and service sector activity data, due on Friday, to gauge the state of an economic rebound three months into a post-COVID reopening.
But analysts expect some cooling in activity, given that the country still faces headwinds from weak export demand and sluggish domestic spending. A soft reading could present some near-term risks to oil prices, as markets reassess their bets on a Chinese economic rebound this year.
China is expected to spur a sharp recovery in oil demand this year. But economic indicators from the country have shown limited appetite for crude over the past two months.
Brent oil futures was flat at $77.42 a barrel, while West Texas Intermediate crude futures fell 0.1% to $72.86 a barrel by 21:17 ET (01:17 GMT). Both contracts retreated on Wednesday as investors locked in some gains after a two-day rally.
A recovery in the dollar also hampered crude prices, as easing fears of a bank crisis saw a resurgence in some bets that the Federal Reserve will have enough headroom to keep raising interest rates.
Still, signs of tightening supplies saw oil sitting on strong gains this week, as disruptions in Kurdish oil shipments cut out about 450,000 barrels per day (bpd), or 0.5% of daily global supply.
Data showed U.S. oil inventories also shrank substantially in the week to March 24. Inventories saw their biggest draw since late-November, indicating that demand in the world’s largest oil consumer was picking up amid better weather conditions. But distillate demand still remained weak.
Russia also cut production by about 300,000 bpd in the first three weeks of March. While the figure was smaller than the 500,000 bpd targeted by the Kremlin, analysts noted that it still indicated some tightening in global supply.
But oil prices are nursing sharp losses for the year amid fears that an economic slowdown will severely crimp crude demand, offsetting a recovery in China. Still, some bulls are holding out for more stabilizing measures by the Organization of Petroleum Exporting Countries, which is set to meet next week.