Oil Prices Rise on Tighter Supply and Chinese Stimulus, Amid Fed Meeting Anticipation
- Shams Ul Zoha
- July 25, 2023
- 12:47 pm
WHAT YOU SHOULD KNOW
- Oil prices rise on expectations of more Chinese stimulus and tighter global crude supplies.
- China’s Politburo pledges supportive measures for the economy, boosting hopes for improved oil consumption.
Focus on U.S. inventory data and Federal Reserve meeting outcome, with expectations of a rate hike.
On Tuesday, oil prices in Asian trade experienced a slight increase, maintaining their three-month highs. The rise was attributed to several factors, including expectations of further Chinese stimulus and signs of tighter global crude supplies. Crude prices surged over 2% at the beginning of the week following commitments from top Chinese officials to bolster economic growth in the country, which is the largest oil importer globally. Furthermore, the impact of recent production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and Russia was also felt, contributing to the tightening of global crude supplies. As a result, Brent oil futures rose by 0.1% to $82.70 a barrel, while West Texas Intermediate (WTI) crude futures increased by 0.4% to $79.03 a barrel.
The focus shifted to China’s stimulus efforts as the economy’s recovery began to show signs of cooling. The ruling Communist Party’s top decision-making body, known as the Politburo, pledged to introduce more supportive measures for the economy in the upcoming months after recent data revealed a significant slowdown in growth during the second quarter. This development raised expectations that oil consumption in China, the largest oil importer, would improve throughout the year. Despite near-record crude imports in 2023, fuel demand in the country struggled to reach pre-COVID levels, leading some to doubt the potential for a surge in global oil demand. However, additional stimulus measures from the Chinese government aimed at promoting private investment and spending could alter this scenario.
The oil markets also closely monitored U.S. inventory data, scheduled for release later on Tuesday and Wednesday. Inventory levels were expected to have declined by over 2 million barrels in the week to July 21, indicating stable demand. However, concerns arose over sluggish fuel consumption in the U.S., the largest oil consumer, due to extreme weather conditions and high inflation impacting demand in recent weeks. Amidst the anticipation of the upcoming Federal Reserve meeting, oil market gains were limited. The central bank was widely expected to raise interest rates by 25 basis points during the two-day meeting, but market attention was primarily on signals regarding future rate policy. Any indication of higher rates could negatively affect the world’s largest economy and potentially curb oil demand as economic activity slows. Data already released this week revealed worsening business activity in the world’s major economies.
Investing Salary provides free access to quality, truthful news for everyone, believing that information should be equally accessible. We hope that this will enable more people to stay informed about current events, understand their effects, and be motivated to take action.
If you feel that we have helped you get the right market knowledge please consider supporting us through Patreon. Even a single dollar counts.
Related news
Popular
