London (Reuters): Oil prices edged up on Tuesday after a 3% fall in the previous session but were pinned below $90 a barrel after weak Chinese economic data offset concern about an escalation of the conflict in the Middle East.
December Brent crude futures, were 91 cents, or 1.04%, higher at $88.36 a barrel by 1040 GMT ahead of their expiry later on Tuesday.
The more heavily traded January contract climbed 83 cents, or 0.96%， to $87.18. US West Texas Intermediate crude rose 82 cents, or 1%, to $83.13.
Both Brent contracts traded $1 higher earlier in the day.
Weaker-than-expected manufacturing and non-manufacturing activity data in China stoked fears of slowing fuel demand from the world’s No. 2 oil consumer.
Its official purchasing managers’ index missed a forecast and dipped back below the 50-point level separating contraction from expansion.
“The country’s manufacturing sector shrank this month, a sign of policy failure to shore up the economy,” PVM’s Tamas Varga said in a note.
But China’s fourth quarter fuel demand is expected to rise 10% year-on-year, PetroChina president Huang Yongzhang said on Tuesday.
The upside for the oil market hangs on whether Israel expands its ground offensive in Gaza, CMC Markets’ analyst Leon Li said.
“If this evolves into a full-scale invasion and there is involvement from Iran, tighter supply worries could resurface.”
Israel’s Prime Minister Benjamin Netanyahu dismissed calls for a halt to fighting to ease a humanitarian crisis, as Israeli forces attacked Hamas in the network of tunnels under the Palestinian exclave.
The risk of escalating conflict in the Middle East and potential oil supply disruptions have boosted oil prices by around 3.4% since the Oct. 6 close, the day before Hamas militants launched an attack in Israel.
“The Middle East premium will likely put a floor under prices in the foreseeable future even if there is no tangible effect on the region’s oil output,” PVM’s Varga added.
Markets were also keeping a close eye on a US central bank meeting ending on Wednesday, despite a high likelihood it will keep interest rates steady, according to a poll by CME’s Fedwatch tool.
