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 and growing anticipation of the Federal Reserve, although weak economic data from China weighed on sentiment.
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 0.1% to $86.66 a barrel, while rose 0.5% to $82.69 a barrel by 21:52 ET (01:52 GMT). Both contracts lost between 2% and 3% on Monday, following a similar loss over the past week.
China PMIs disappoint as manufacturing activity shrinks
Key purchasing managers index (PMI) data from world no.1 oil importer China showed that unexpectedly shrank in October, while slowed substantially.
The reading indicated that despite a slew of stimulus measures from Beijing, business activity was struggling to pick up amid worsening local and overseas demand for Chinese goods.
The data also raised more questions over just how much more Chinese oil consumption will increase this year, given the steadily worsening economic conditions.
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.
Chinese officials have rolled out a string of spending measures in recent months, and are also set for a massive 1 trillion yuan ($140 billion) bond issuance in the fourth quarter to increase infrastructure spending.
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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