Oil steadies, US Fed chief's speech in spotlight

[August 24, 2023]  By Ahmad Ghaddar

LONDON (Reuters) -Oil prices steadied after earlier declines on Thursday caused bydisappointing economic data from key economies, with investors awaiting a speech by U.S. Federal Reserve Chair Jerome Powell on Friday for clues on interest rate moves.

Brent crude climbed 6 cents, or 0.1%, to $83.27 a barrel by 0855 GMT, after dropping to $82.57 earlier in the session. U.S. West Texas Intermediate crude rose 4 cents, or 0.1%, to $78.93 a barrel, after falling to $78.22.

Manufacturing data from a host of purchasing managers' index (PMI) surveys on Wednesday painted a grim picture of the health of economies across the globe, raising demand concerns, analysts said.

Japan reported shrinking factory activity for a third straight month in August. Euro zone business activity also declined more than expected, particularly in Germany. Britain's economy looked set to shrink in the current quarter, leaving it in danger of falling into recession.

U.S. business activity approached the stagnation point in August, with growth at its weakest since February.

"China's worsening growth momentum is the primary cause of the deterioration in global manufacturing," BCA Research analysts said. "This is weighing on European countries where growth remains heavily exposed to Chinese demand, like Germany," they added.

Meanwhile, Federal Reserve officials and policymakers from the European Central Bank, the Bank of England and the Bank of Japan head to Jackson Hole where higher-for-longer interest rate talk may dominate despite a dip in inflationary pressures.

An aerial view shows tugboats helping a crude oil tanker to berth at an oil terminal, off Waidiao Island in Zhoushan, Zhejiang province, China July 18, 2022. cnsphoto via REUTERS /file photo

On the supply side, Iran's crude oil output will reach 3.4 million barrels per day (bpd) by the end of September, the country's oil minister was quoted as saying by state media, even though U.S. sanctions remain in place.

U.S. officials are also drafting a proposal that would ease sanctions on Venezuela's oil sector, allowing more companies and countries to import its crude oil, if the South American nation moves toward a free and fair presidential election, according to five people with knowledge of the plans.

A larger than expected fall in U.S. crude inventories helped support the market.

U.S. crude inventories fell by 6.1 million barrels in the week to Aug. 18 to 433.5 million barrels, compared with analysts' expectations in a Reuters poll for a 2.8 million-barrel drop.

However, a climb in U.S. gasoline stocks last week indicated fuel demand has been weaker than expected.

Meanwhile, analysts expect Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries (OPEC), to extend its 1 million bpd voluntary production cut into October to help support the market.

(Additional reporting by Mohi Narayan in New Delhi; Editing by Kim Coghill)

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