Oil prices rose on Tuesday as falling U.S. and OPEC production tightened an oversupplied market and outweighed a slump in China’s manufacturing sector that stirred fears of slowing demand growth.
U.S. crude futures were trading at $34.10 per barrel at 0633 GMT, up 35 cents from their last settlement. Prices are up 30 percent from Feb. 11, when the contract dropped to an intra-day low of $26.05 a barrel, the lowest since 2003.
ANZ bank said that a break above $34 would “add to the view for some that the bottom in the crude oil market is now in place.”
International benchmark Brent crude futures were up 27 cents at $36.84 per barrel, and more than 20 percent up since Feb. 11.
Traders said that prices had risen on the back of shifts in oil supply and demand fundamentals, especially dipping production in the United States and the Organization of the Petroleum Exporting Countries (OPEC).
U.S. government data on Monday showed crude output last December fell for a third straight month by 43,000 barrels per day (bpd) to 9.26 million bpd, its lowest in a year. Although average annual 2015 crude production of 9.43 million bpd was still 720,000 bpd above the previous year.
Supply from OPEC has also declined, falling by 280,000 bpd in February to 32.37 million bpd, according to a Reuters survey based on shipping data and information from sources at oil companies, OPEC as well as from consultants.
However, weak economic data out of China and the prospect of slowing oil demand growth prevented more price rises.
“Crude oil demand growth appears to be slowing,” Morgan Stanley said on Tuesday.
China’s factories shed jobs at the fastest rate in seven years in February as activity shrank to five-month lows, a private survey showed.
“With transportation and gasoline demand decelerating, especially in China… product builds and exports could lead to weaker refining margins globally and less crude demand,” the bank said.
At the same time, discussions among major oil producers, including Saudi Arabia and Russia, agreeing to a production freeze are unlikely to reduce a global overhang in supply of well of over 1 million bpd, other analysts said.
“The prospect of a detente between two of the largest oil producers in the world (Saudi Arabia and Russia), already at loggerheads over the Syria conflict, was almost too good to be true,” Singapore Exchange (SGX) said in a monthly note on Tuesday.
“Alas, this turned out to be the case with the meeting yielding no more than a production freeze subject to compliance from Iran and Iraq. A production freeze is nothing near to a production cut,” it added.