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News about deflation in China and a crude oil inventory build in the United States have added downward pressure to oil prices, but bullish sentiment remains robust.
Reports of sharply lower U.S. oil exports contributed to a temporary slide in oil prices, as daily shipment rates fell from 5.28 million bpd two weeks ago to 2.36 million bpd last week, the Energy Information Administration reported Wednesday.
At the same time, production rose, hitting an estimated 12.6 million barrels daily in the U.S., reinforcing the downward pressure on oil prices.
Earlier in the week, the latest China oil import data also served to pressure prices as it marked a sharp decline on a monthly basis, even though on an annual basis the July daily average was higher.
"Oil prices have been resilient to a weak economic showing out of China in recent weeks, with market participants choosing to place their focus on the tighter supplies conditions from Saudi Arabia and Russia's output cuts to continue their unwind from previous bearish positioning," Reuters quoted IG analyst Yeap Jun Rong as saying in a note.
“Commodities are experiencing a global downturn in demand, but we may not get the same disinflation that we’ve seen in previous downturns because there is a collection of supply constraints that are holding up commodity prices,” Paul Bloxham, HSBC chief economist for Australia, said as quoted by the Australia Financial Review.
“This super squeeze we’re seeing in the commodity space is going to be a contributor to the sticky inflation challenge that central banks are facing,” Bloxham added.
After a brief dip, oil prices climbed again and remain at their highest levels in nine months, with Brent crude moving toward $88 per barrel at the time of writing, and West Texas Intermediate trading at over $84.50 per barrel.
Today, traders are watching the July CPI release in the U.S., which should offer insight into future demand trends in oil.
By Irina Slav for Oilprice.com
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.