Oil Prices rise on hopes for China Stimulus

Oil prices edged up on Tuesday on hopes of more economic stimulus in China after disappointing data from the world’s No.2 economy.

China’s consumer inflation weakened more than expected, to 1.2 percent year-on-year in May, raising concerns about growing deflationary pressures as the economy cools. Its producer prices fell for the 38th straight month.

“The weak data continues to point out the sluggish demand in the real economy. The government should roll out more easing measures to lower the real financing costs to boost growth,” said Yu Yafang, macro strategist at Huachuang Securities in Beijing.

Front month U.S. crude CLc1 climbed 41 cents to $58.55 a barrel by 0655 GMT (0255 ET) , after ending the previous session down 99 cents. Brent for July delivery LCOc1 rose 45 cents to $63.14 a barrel, having settled down 62 cents in the previous session.

Chinese oil imports fell about 11 percent in May from a year ago in the steepest drop since November 2013.

“The weak import numbers were a result of a significant increase in refinery maintenance in May … At the same time, the strong level of imports in recent months has put pressure on storage facilities at ports in China,” Australia and New Zealand Banking Group Ltd (ANZ) said in a research note on Tuesday.

“This should be alleviated later this year as the construction of new storage facilities is completed.”

EYES ON SUPPLY FROM IRAQ, IRAN

Investors have also been concentrating on supply, with OPEC on Friday agreeing to continue unconstrained output and Iran and Iraq potentially boosting production.

“Iran in particular has the potential to flood the market with the most crude oil if sanctions are lifted later this month,” ANZ said.

In Iraq, government forces backed by U.S.-led coalition air strikes have opened supply lines into Baiji town and its nearby oil refinery, making progress against Islamic State rebels in a seesaw battle that has gone on for months, the Pentagon said on Monday.

An official in Iran – OPEC’s fifth-largest crude producer – said on Monday that eight western European companies are keen to invest in the country’s $2.8 billion Siraf oil refinery project, as it ramps up capacity to reduce its dependence on imports.

Elsewhere, oil production declines from the largest U.S. shale plays are forecast to deepen for a third consecutive month in July even as rig productivity remains high, data from the U.S. Energy Information Administration showed.

Asia shares sank in a sea of red on Tuesday as speculation of a U.S. rate rise as early as September hit emerging markets generally, while failing to give a lasting lift to the dollar.

Source: Reuters