West Texas Intermediate held below US$76 a barrel after dropping 1.5% on Monday. China’s recovery remains patchy with recent data pointing to a contraction in manufacturing. Still, tourism and travel activity soared on the first day of the country’s five-day Labor Day holiday, possibly signalling increased demand for fuels in the world’s largest crude importer.

In the US, JPMorgan Chase & Co agreed to acquire First Republic Inc, the latest lender to fail. While the deal could help to stabilise the financial system, there are still concerns over the fate of other weak banks in the country.

Oil has shed more than 5% this year despite a move by the Organization of Petroleum Exporting Countries and its allies to cut supply from this week. Losses have been spurred by a darkening economic outlook, with central banks including the Federal Reserve continuing to raise rates. The Fed is expected to deliver another hike this week, potentially the last rise in the current cycle.

Crude has been pressured as “data from China showed a slump in manufacturing”, said Charu Chanana, market strategist for Saxo Capital Markets Pte. Sentiment was also hurt by banking concerns as First Republic Bank became the latest casualty of the increases in interest rates, she said.

Prices:

• WTI for June delivery rose 0.1% to US$75.76 a barrel at 11.56am in Singapore.
• Brent for July settlement added 0.1% to US$79.39 a barrel.