Oil prices rose on Tuesday after China unexpectedly cut key interest rates for the second time in three months to support a faltering economic recovery, but gains were capped by modest economic data.
Brent crude futures rose 11 cents, or 0.1 percent, to trade at $86.32 a barrel at 0414 GMT, while US West Texas Intermediate crude rose seven cents, or 0.1 percent, to $82.57 a barrel.
Prices changed direction and turned higher after the People's Bank of China cut the interest rate on loans worth 401 billion yuan ($55.25 billion) under a one-year medium-term lending facility for some financial institutions by 15 basis points to 2.50 percent from 2.65 previously.
The People's Bank of China said in an online statement that the cash infusion aims to counter factors including tax payments in order to maintain a reasonable abundance of liquidity in the banking system.
The market was expecting the People's Bank of China to wait until September before easing again, and today's cuts reflect the authorities' growing concern about the macroeconomic situation, Robert Carnell, regional director of research at ING Bank, said in a note.
China's industrial production and retail sales data released on Tuesday showed that the economy slowed further over the past month, adding pressure to already faltering growth and prompting authorities to cut the main interest rate to support activity.
Despite the weak macroeconomic data, China's appetite for oil appeared strong, as (TADAWUL:2030) refinery productivity in the country increased in July 17.4 percent from the previous year, after refineries kept production high to meet the demand for local transportation during the summer season and benefit from high regional profit margins from during the export of fuel.
