Investing.com - Oil prices rose on Wednesday, snapping three days of losses, but gains were held in check by concerns over the economic fallout from the protracted trade war between the U.S. and China.
U.S. crude futures gained 79 cents, or 1.5%, at $54.79 a barrel by 08:08 AM ET (12:08 GMT), while international benchmark Brent was up 77 cents, or 1.3%, at $59.04 a barrel.
Market sentiment was boosted after a private sector survey overnight showing that activity in China's services sector expanded at the fastest pace in three months in August as new orders rose.
China is the world's second-largest oil consumer and largest importer.
But U.S. President Donald Trump on Tuesday warned he would be "tougher" on Beijing in a second term if trade talks dragged on, adding to concerns that the trade spat could trigger a U.S. recession.
"The bullish bandwagon seen earlier this year will not be making another appearance," Stephen Brennock of oil broker PVM said. "The world economy is slowing and nowhere is this pullback in activity more apparent than in the manufacturing sector."
U.S. data released on Tuesday showed manufacturing activity contracted in August for the first time in three years, while eurozone activity shrank for a seventh month.
Citi cut its Brent forecasts for the third and fourth quarters by about $10 a barrel to $62 and $64 respectively, and expects the benchmark to fall to $53 by the end of 2020. Brent is about 23% lower than its peak for this year in April.
"Next year the curtailment of demand growth coming from lower (economic) growth expectations and continuation of the U.S.-China trade war could shave more oil demand from the market," Citi analysts wrote.
The American Petroleum Institute will release its weekly estimate of U.S. crude stocks at 4:30 PM ET (2030 GMT). The U.S. government’s official data are due Thursday, a day later than usual because of the U.S. Labor Day holiday on Monday.
U.S. crude stockpiles are expected to have declined for a third straight week.
--Reuters contributed to this report