Prices of oil were marginally down on Monday as investors remained nervous about the pace of Chinese economic growth and the likelihood of further US rate hikes that could dampen fuel demand.
Brent crude dipped 8 cents, or 0.1%, to $84.40 per barrel by 03:30 GMT, while U.S. West Texas Intermediate was at $79.78 per barrel, having sunk by 5 cents, also 0.1%.
Brent and WTI published a second week of losses on Friday after Fed Chair Jerome Powell stated the U.S. central bank may need to increase rates further to cool still-too-high inflation.
Oil climbed in early Asian trade prior to paring gains, as China’s move to halve stamp duty on stock trading to strengthen struggling markets temporarily drove the prices up.
“Unfortunately, after last week’s modest (Chinese central bank interest) rate cut, the announcements above amount to another piecemeal measure that won’t alter investor gloom towards China,” said Tony Sycamore, a market analyst at IG.
China’s manufacturing purchasing managers’ index (PMI), due later this week, can possibly disclose more grim economic news concerning the world’s second-biggest economy, according to Sycamore, adding that the PMI was likely to remain in opposition for the fifth month in a row.
According to CMC markets analyst Tina Teng, a soft-landing scenario for the U.S. economy buoyed energy markets on Monday, in spite of the Federal Reserve’s dovish position on rate hikes.
In the U.S., energy companies reduced the number of active oil rigs for a ninth month in August, as Baker Hughes mentioned in a report.
In addition, Tropical Storm Idalia has developed in the Caribbean and is expected to intensify into a hurricane before making landfall in Florida.
The hurricane is expected to skip Gulf oil and gas hubs, with the most likely damage being a day or two of power interruptions, according to IG’s Sycamore. According to him, this “should provide some short-term support for the oil price.”
However, “the narrative of tightening supply,” primarily due to decreasing oil stockpiles and supply curves by the OPEC+ collective of oil producers, has been undercut by hopes of relaxing sanctions on Iran and Venezuela, according to ANZ Research in a report issued on Monday.