Oil prices seesawed on Wednesday, buffeted by low trading volume as an interest rate hike by China and Europe's debt woes kept demand concerns in focus ahead of data seen showing a drop in US crude stocks.
China's rate rise, the third in 2011, reinforced concerns about demand, especially in the short term, and the late-Tuesday cut of Portugal's credit rating by Moody's underlined worries over the sputtering global economy.
“I think the market accepts that China is making a concerted attempt to rein in inflationary forces through use of interest rates, so it's short-term bearish for commodity usage but medium-term, it's supportive if controlled growth is managed,” Mark Thomas, head of energy Europe at Marex, said.
Brent futures for August fell 25 cents to $113.36 a barrel by 11:50 a.m. EDT (17:50 SA time), having bounced off an earlier $111.91 low.
US crude was up 2 cents at $96.91 a barrel, hovering near its 30- and 150-day moving averages of $97.05 and $97.10.
Trading volume remained tepid, increasing volatility, as Brent and US crude stayed on pace to trail 30-day averages.
Also limiting oil's losses, according to brokers and analysts, was Tuesday's news of an unexpectedly mild reduction in Saudi official selling prices, viewed as an indication that OPEC's top exporter was not moving to push prices lower.
The International Energy Agency's coordinated release of consuming nations' oil reserves also was being viewed as insufficient and an ineffective tool to pull prices lower.
Worries about inflation increased gold's attraction as a safe-haven play, pushing it to a two-week high, and analysts and brokers said oil's appeal as a store of value against shaky currencies limited its losses.
“While China's rate hike and Europe's problems are bearish, oil gets caught up in the flight-to-quality trade and like gold or silver, oil is used to hedge against inflation,” said Phil Flynn, analyst at PFGBest Research in Chicago.
Oil investors awaited weekly inventory reports on US oil inventories, with industry group American Petroleum Institute's report first up at 4:30 p.m. EDT (22:30 SA time) on Wednesday.
Crude stocks are expected to have fallen last week, with gasoline stockpiles seen steadying and distillate stocks edging up, a Reuters survey of analysts on Monday showed. - Reuters