Investing.com– Oil prices rose slightly in Asian trade on Tuesday after plummeting nearly 3% in the prior session amid easing concerns over Middle East supplies, with focus now turning to upcoming Chinese economic readings and a Federal Reserve meeting.
Crude prices logged heavy losses as no immediate escalation in the Israel-Hamas war saw traders pricing in a lower risk premium over the conflict. The outbreak of the war had spurred some fears that it could draw in other Middle Eastern powers and disrupt oil supplies in the region- fears which are yet to be realized.
But traders remained wary of any new developments in the war, especially as Israel launched a massive ground offensive on Gaza.
Traders chose to lock-in recent profits, hunkering down before a string of key economic events this week, most notably a Fed decision on interest rates this Wednesday.
rose 0.3% to $86.71 a barrel, while rose 0.4% to $82.66 a barrel by 20:04 ET (00:04 GMT). Both contracts lost between 2% and 3% on Monday, following a similar loss over the past week.
China PMIs to provide more immediate cues
Markets were now squarely focused on key purchasing managers index (PMI) data from world no.1 oil importer China, due later in the day.
The reading is expected to show steady, albeit limited expansion in the , while is expected to have improved slightly.
Any signs of economic health in China point to better crude demand in the country, which has been otherwise struggling to shore up growth this year.
Chinese officials have rolled out a string of spending measures, and are also set for a massive 1 trillion yuan ($140 billion) bond issuance in the fourth quarter to increase infrastructure spending.
While this move is expected to increase fuel demand, analysts questioned just how much more oil consumption in the country could increase, as it struggles with a growing crisis in the property sector.
Chinese oil and gas giant Sinopec (OTC:) recently said that China’s fuel demand had likely peaked this year, and was set to taper off amid increased demand for electric vehicles.
Fed meeting, rate outlook in focus
Oil markets were also largely risk-averse before the conclusion of a Fed meeting on Wednesday. While the central bank is expected to , it is also expected to reiterate that rates will remain higher for longer.
Such a scenario is expected to weigh on economic growth in the coming months, and is expected to potentially stymie oil demand as monetary conditions tighten across the globe.
Strength in the – as markets positioned for the Fed meeting- also weighed on oil prices in recent sessions.
Before the Fed, the is also set to meet on Tuesday, and could potentially tighten monetary policy.
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