Despite investors’ continued concern over the rate of growth and potential demand-dampening interest rate increases from the United States, oil prices increased slightly on Monday as a result of China’s efforts to support its ailing economy.
In its most recent effort to support faltering markets, China cut the stamp duty on stock transactions in half.
By 8:20 GMT, West Texas Intermediate crude in the United States increased by 42 cents, or 0.5%, to $80.25, while Brent crude increased by 40 cents, or 0.5%, to $84.88 a barrel.
According to Ole Hansen, head of commodity strategy at Saxo Bank, today’s attention is on “China’s actions to support its economy, Tropical Storm Idalia moving towards Florida, and whether Brent can regain momentum on a break above $85.”
On Monday, Tropical Storm Idalia might become a hurricane, bringing this week’s severe winds and storm surges to Florida and Cuba.
Hurricanes and storms in the U.S. Gulf of Mexico have the potential to damage refineries and offshore installations, which can have an impact on oil markets.
According to IG market analyst Tony Sycamore, the most likely effect of Idalia will be a day or two of power disruptions. This “should see some short-term support for the oil price,” the man said.
After Fed Chair Jerome Powell suggested the U.S. central bank may need to hike rates further to slow still-too-high inflation, Brent and U.S. crude suffered losses for a second consecutive week on Friday.
Despite the Federal Reserve’s hardline approach on rate hikes, CMC markets analyst Tina Teng said a soft landing scenario for the U.S. economy boosted energy markets on Monday.
Falling oil stocks and supply cuts from the OPEC+ group of oil producers have kept oil prices above $80 per barrel.
According to analysts speaking to Reuters last week, Saudi Arabia is anticipated to prolong a voluntary cut in oil production of 1 million barrels per day into October in an effort to further support the market.