Crude oil futures moved sideways during mid-morning trade in Asia Monday, continuing to hold on to support from signs that supply may tighten while market participants digested news of China's slowing economic growth.
At 10:40 am Singapore time (0240 GMT), ICE March Brent crude futures was up 8 cents/b (0.13%) from Friday's settle to $62.78/b, while the NYMEX February light sweet crude contract was 7 cents/b (0.13%) higher at $53.87/b.
"It is a battle between OPEC [and its allies] tightening production and a slowdown in global economy," Mitsubishi Corp. senior adviser Tony Nunan said Monday.
Preliminary data released early Monday by the National Bureau of Statistics showed that China's gross domestic product growth in the fourth quarter of 2018 stood at 6.4%, a further contraction from the 6.5% posted in the third quarter of 2018.
This brought China's GDP growth down to 6.6% for the whole year of 2018, one of the slowest rates in more than 20 years.
According to the Economics & Development Research Institute, China's GDP growth is expected to slow further to around 6.2% in 2019 due to trade tensions with Washington, uncertainties in international capital flows, weakening domestic investment amid tight credit controls, property market curbs and tighter infrastructure financing. The EDRI is the think tank of state-run Sinopec, the world's largest refiner by capacity.
The slowdown is in line with the World Bank's projections in an ominously titled report called 'Darkening Skies.'
Cautious sentiment in light of bearish China data has capped the recent rebound in crude prices, analysts said.
"Though oil fundamentals have demonstrated for signals of rebalancing in the markets, persistent weakness in global economic conditions along with opportunistic US swing producers will elicit for headwinds on pricing levels in the longer term," Benjamin Lu, investment analyst at Phillips Futures, said.
Meanwhile, markets remained firmly focused on developments in the geopolitical sphere.
"The scrutiny remains on US-China trade even as no scheduled announcements or meetings are expected," IG market strategist Pan Jingyi said.
"On the US-China trade negotiations front, China has offered to significantly boost its purchases of US goods in order to reduce the trade imbalance to zero by 2024, but US officials counter-demanded for the imbalance to be cleared in the next two years," Mizuho Bank analysts said Monday.
"The US is also reportedly considering lifting tariffs on China, but any trade deal will be subject to regular verification that China is keeping to its promises on reforms with regards to trade, market access and IP protection," the analysts added.
Market participants will be awaiting the release of weekly US crude inventory data by the American Petroleum Institute and the US Energy Information Administration on Tuesday and Wednesday, respectively, for further cues.
As of 0240 GMT, the US Dollar Index was down 0.06% at 95.950.
