Oil prices exhibited minimal fluctuations on Monday as China implemented measures to fortify its economy.
Nevertheless, investors maintained their concerns regarding the pace of economic growth and potential U.S. interest rate hikes, which could potentially dampen oil demand.
China’s latest effort to bolster its struggling financial markets involved a significant reduction in stamp duty on stock trading, a move closely watched by market participants. Also, the energy sector remained vigilant about the looming Tropical Storm Idalia and its potential impact on oil and gas production in the U.S. Gulf region.
Brent crude, against which Nigerian oil is priced, declined by 15 cents or 0.2% to settle at $84.33 per barrel at 11 a.m. while the U.S. West Texas Intermediate crude managed to gain 5 cents to $79.88.
Ole Hansen, the Head of Commodity Strategy at Saxo Bank, said, “Today’s focus centers on China’s actions to fortify its economy, the trajectory of Tropical Storm Idalia as it approaches Florida, and whether Brent can regain momentum by surpassing the $85 threshold.”
According to the latest update, Tropical Storm Idalia was intensifying as it advanced toward Cuba.
Analysts, such as Tony Sycamore from IG Markets, noted that its most probable impact could result in temporary power outages, a development that “should provide some short-term support for oil prices.”
The previous week witnessed Brent and U.S. crude registering their second consecutive week of losses following Federal Reserve Chair Jerome Powell’s indication that further interest rate hikes might be necessary to combat persistently elevated inflation.
Nevertheless, Tina Teng, an analyst at CMC Markets, highlighted that the prospect of a soft economic landing in the United States buoyed energy markets on Monday, despite the Federal Reserve’s hawkish stance on rate hikes.
Oil prices have managed to maintain levels above $80 per barrel, benefiting from declining oil inventories and production cuts implemented by the OPEC+ consortium of oil-producing nations.
Notably, analysts informed Reuters last week that Saudi Arabia is anticipated to extend its voluntary oil output reduction of 1 million barrels per day into October, in a bid to provide continued support to the market.