By Wallace Witkowski and Sara Sjølin, MarketWatch
SAN FRANCISCO (MarketWatch) — Benchmark crude-oil futures fluctuated between slight gains and losses Wednesday, after closing at a three-week high a day earlier, as China raised interest rates.
Crude for August delivery CL1Q -0.09% fell 10 cents, or 0.2%, to $96.79 a barrel on the New York Mercantile Exchange. During the session, oil has traded as high as $97.79 a barrel and as low as $95.90 a barrel.
“It’s a combination of concerns that the interest-rate increase in China will slow demand for oil and uncertainty if the problems in Greece and Portugal will change the demand structure,” said Phil Flynn, oil analyst with PFG Best.
The People’s Bank of China lifted lending and deposit rates by 0.25 percentage point on Wednesday, marking the third such adjustments this year. Read more about the China rate hike.
Oil prices saw some support ahead of U.S. inventory reports that are expected to show lower crude inventories for the fifth straight week, even as global debt concerns continued to intensify.
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On Tuesday, Moody’s Investor Service downgraded Portugal’s credit rating to junk status and on Monday the Standard & Poor’s credit-rating firm signaled that a plan to roll over Greek debt would constitute a “selective default”.
Matt Smith, an analyst for Summit Energy Services, said he is surprised crude markets aren’t selling off more than they are given these head winds.
“The crude market is taking this news in its stride, believing that emerging market oil demand growth is strong enough to withstand these speed bumps, and likely to benefit from lower inflation in China in the long run,” Smith said.
Oil closed the North American session at a three-week high Tuesday after a brokerage raised its price target for crude, and as some optimism about the U.S. economy encouraged buying.
Data watch
The American Petroleum Institute will issue its latest weekly update on oil supplies later Wednesday, followed by the more closely watched report from the U.S. Energy Information Administration on Thursday.
The release dates for both were delayed by a day because of the Independence Day holiday on Monday.
Analysts polled by Platts expect crude-oil stocks declined by 2.5 million barrels, while gasoline stocks are forecast to have risen by 500,000 barrels, for the week ended July 1.
Gasoline inventories typically decline in the lead up to the July 4 holiday weekend and then begin to rebuild in July, according to Platts.
Wallace Witkowski is a MarketWatch news editor in San Francisco.
Sara Sjølin is a MarketWatch reporter, based in New York. Virginia Harrison in Sydney contributed to this report.
