Oil prices rebound after two-week slump, WTI nears $80 mark


Oil prices rose slightly on Monday, recovering from a two-week decline, as investors awaited economic data from China, the world’s largest oil importer. U.S. crude futures were close to the $80 a barrel level, a key psychological barrier for the market.

China’s stimulus measures boost oil demand outlook

China announced more measures over the weekend to support its stock market and property sector, which have been hit by regulatory crackdowns and debt woes. The move signaled that Beijing was willing to roll out more economic stimulus to boost growth and consumption.

Oil prices rebound after two-week slump, WTI nears $80 mark

Oil traders were optimistic that China’s stimulus measures would help shore up oil demand in the country, which accounts for about 14% of global consumption. China’s oil imports rose by 8.1% year-on-year in July, but fell by 3% month-on-month due to port congestion and maintenance.

Focus this week is on China’s purchasing managers’ index (PMI) data for August, due on Thursday. The data is expected to show that China’s manufacturing sector remained in contraction for a fourth straight month, dragging down overall business activity.

Fed’s hawkish stance, dollar strength cap oil gains

Oil prices were also limited by the strength of the U.S. dollar, which rose to a near three-week high against a basket of currencies. A stronger dollar makes oil more expensive for holders of other currencies, reducing their purchasing power.

The dollar was boosted by hawkish comments from Federal Reserve Chair Jerome Powell, who warned that interest rates would likely need to rise further to curb inflation. Powell also said that the U.S. economy was not cooling as expected, which could keep activity and crude demand high in the world’s largest fuel consumer.

However, U.S. fuel demand is also expected to slow in the coming months, as the summer driving season comes to an end and the delta variant of the coronavirus poses a threat to mobility. U.S. gasoline demand fell by 1.9% last week, according to GasBuddy.

OPEC+ supply cuts support oil market balance

Oil prices were also supported by the ongoing supply cuts by the Organization of the Petroleum Exporting Countries and their allies (OPEC+), who have been gradually easing their output curbs since May. The group agreed in July to increase production by 400,000 barrels per day (bpd) each month until December, bringing back about 2 million bpd of supply by the end of the year.

OPEC+ has been cautious in its output policy, as it monitors the impact of the pandemic on oil demand and balances it with the recovery in supply from other producers, such as the U.S. and Iran. The group will meet again on September 1 to review the market situation and adjust its plans accordingly.

Brent crude futures rose 0.3% to $83.97 a barrel, while West Texas Intermediate (WTI) crude futures rose 0.1% to $79.94 a barrel by 21:10 ET (01:10 GMT). Both contracts fell nearly 2% each last week.

Category: Business

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