Oil prices hold steady amid US inventory drop and slowing China demand

Oil prices were steady on Wednesday, with global benchmark Brent hovering near the one-month low it hit in the prior session, as signs of weakening demand growth in China clashed with the prospect of declining US oil stockpiles.

Brent crude oil futures was down by 4 cents to $83.69 a barrel by 0315 GMT. US West Texas Intermediate crude futures also eased 4 cents to $80.72.

Both benchmarks dropped in the three prior sessions, with Brent crude futures trading as low as $83.30 on Tuesday, the lowest since June 17.

While concerns over Chinese demand continue to weigh on investor sentiment, the drawdown in U.S. inventories is a factor limiting the downside in oil prices, said Priyanka Sachdeva, senior market analyst at Singapore-based brokerage Phillip Nova.

"And steady US retail data points out that the economy is still healthy despite higher borrowing costs. This neutralizes fears of a slowdown in the US economy and fears of dented demand for oil."

China, the world's top oil importer, saw its economy grow 4.7% in the second quarter, official data showed earlier this week, the slowest growth since the first quarter of 2023.

A stronger US dollar has also weighed on oil prices, said ANZ Bank analyst Daniel Hynes in a note. The dollar index was slightly higher for a third consecutive session on Wednesday, making oil more expensive for investors holding other currencies.

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In the United States, the world's largest oil producer and consumer, crude oil inventories fell by 4.4 million barrels in the week ended July 12, market sources said, citing data from the American Petroleum Institute.

Analysts polled by Reuters had estimated crude stocks would fall by 33,000 barrels. The U.S. Energy Information Administration will release its official storage report at 1430 GMT.

Supporting oil prices, retail sales were unchanged in June as a drop in receipts at auto dealerships was offset by broad strength elsewhere, a display of consumer resilience that bolstered economic growth prospects for the second quarter.

Meanwhile rising geopolitical risk is also helping limit oil price declines, Growmark Energy analysts said.

A Liberia-flagged oil tanker was assessing damage and investigating a potential oil spill after it was attacked by Yemen's Houthis in the Red Sea, the Red Sea and Gulf of Aden Joint Maritime Information Center (JMIC) said on Tuesday.