Oil rises on strong Chinese demand

HOUSTON: Oil prices edges higher on Tuesday as upbeat economic data in No. 2 oil consumer China more than offset wider concerns that possible increases to US interest rates could dampen growth in the top consuming country.

Brent crude rose 49 cents, or 0.6 per cent, to $85.25 a barrel by 12:48 p.m. ET (1648 GMT), while US West Texas Intermediate was up 49 cents, or 0.6pc at $81.32.

China’s economy grew by a faster than expected 4.5pc in the first quarter while oil refinery throughput rose to record levels in March, data showed.

“The big picture with China’s growth still suggests a market that is under supplied,” said Phil Flynn, an analyst at Price Futures Group.

But the prospect of another US interest rate hike continued to support the dollar and remained a drag on sentiment. Traders expect the US Federal Reserve to raise rates by 25 basis points at its May meeting.

The US central bank most likely has one more interest rate rise in store to fight inflation, Atlanta Fed President Raphael Bostic said.

“The next step may depend on global growth and whether the economy can weather the recent storm, particularly in the US, where tighter credit could significantly weigh on growth for the rest of the year,” said Craig Erlam of brokerage OANDA, referring to the oil price outlook.

Crude was also pressured by the Iraq federal government and Kurdistan Regional Government (KRG) taking a step towards a resumption in northern oil exports from the Turkish port of Ceyhan after they were halted last month.