Oil traded near a three-month high in New York as speculation that China will take more steps to boost economic growth countered signs of weakening demand in the U.S.
Futures advanced as much as 0.4 percent. Growth in China's industrial production slowed while inflation cooled for a fourth straight month in July, providing more room for policies to stimulate expansion of the world's second-biggest oil consumer. U.S. petroleum consumption fell 1.1 percent last week, the first drop in four weeks, according to a report from the Energy Department yesterday.
"The market is in a mode where all that matters is the prospect of central bank monetary stimulus," said Guy Wolf, a strategist at Marex Spectron Group Ltd., a London-based commodities broker who predicts Brent crude will be capped at $120 a barrel. "So soft growth data, without inflationary pressure, is a green light for central banks. Further stimulus in China is almost a certainty."
Oil for September delivery was at $93.55 a barrel, up 19 cents, or 0.2 percent, in electronic trading on the New York Mercantile Exchange at 8:39 a.m. London time. Prices climbed to $94.72 yesterday, the highest since May 15. The contract is up 20 percent from its lowest close this year of $77.69 on June 28. Prices are 5.3 percent lower since the start of the year.
Brent crude for September settlement gained 11 cents to $112.25 a barrel on the London-based ICE Futures Europe exchange. The European benchmark's premium to West Texas Intermediate was at $18.73, down from $18.79 yesterday.
China's consumer prices rose 1.8 percent from a year earlier, the National Bureau of Statistics said today. That compares with the 1.7 percent median forecast in a Bloomberg News survey of 33 economists and a 2.2 percent gain in June.
The deceleration in price gains may encourage policy makers to introduce more measures to support growth, aiding efforts to reverse an economic slowdown that's lasted six quarters.
"A rate cut or further liberalization of lending in deposit markets, or a cut in reserve requirements for banks could be a positive contributor to the energy complex," said Michael McCarthy, a chief market strategist at CMC Markets in Sydney. "The case is very strong" for stimulus, he said.
China's industrial output rose 9.2 percent in July from a year earlier, the National Bureau of Statistics said today. The growth compares with the 9.7 percent median estimate in a Bloomberg News survey of 32 analysts.
U.S. crude stockpiles fell 3.7 million barrels last week, the Energy Department said. They were forecast to decline 1.6 million barrels, according to the median estimate of 10 analysts in a Bloomberg News survey.
"Demand has softened in the U.S.," said Jonathan Barratt, the chief executive officer of Barratt's Bulletin, a commodity- markets newsletter in Sydney, who predicts New York oil faces technical resistance at $94.50 a barrel. "Prices have had a very good run."
Total products supplied, a measure of fuel consumption, dropped 204,000 barrels a day to 18.9 million last week, the first decline since the week ended July 6, according to the Energy Department report.
Speculation that nations are stockpiling oil at the fastest rate in 14 years is fanning expectations for Brent crude to drop below $100 a barrel.
OPEC pumped 2.1 million barrels a day more than projected demand in April through June, the biggest overproduction for any quarter since 1998, the International Energy Agency estimates. Brent will fall to $93 by September and $83 by year-end, according to the Centre for Global Energy Studies. The increase was little noticed as traders focus on U.S.-led sanctions curbing Iran's oil exports, Citigroup Inc. said.
Tropical Storm Ernesto was forecast to become a hurricane as it picked up speed on its westward path over the southern part of the Bay of Campeche, Mexico's biggest oil-producing region.
Ernesto's top winds were 70 miles per hour as of 1 a.m. central time today, up from 65 mph earlier. A Category 1 hurricane on the five-step Saffir-Simpson scale starts at 74 mph. Its center was 30 miles north northeast of Paraiso, Mexico, and it was traveling west at 16 mph, the Miami-based center said in an advisory. Tropical storm-strength winds of 39 mph or more extend 140 miles from its core.