Oil slumped on Monday as traders await signals of further rate hike cues from the US and European central banks, with tightening supply and hope for Chinese stimulus underpinning Brent at $80 a barrel.
Brent crude futures rose 4 cents, to $81.11 a barrel by 0644 GMT. West Texas Intermediate (WTI) crude was at $77.11 a barrel, also up 4 cents.
Benchmarks posted their fourth straight weekly gains last week, up 1.5% and 2.2%, respectively, as supply is expected to contract after the OPEC+ cuts. Clashes also escalated in Ukraine last week, after Russia withdrew from the U.N.-brokered safe sea corridor agreement for grain exports.
While another Fed rate hike this week could cause short-term price volatility, tightening market conditions regarding OPEC’s supply cuts and growing market speculation that China will continue to spur prices along the third quarter of 2023 are expected.
Investors have priced in quarter-point increases by the Federal Reserve and the European Central Bank this week, so the market will focus on what Fed Chairman Jerome Powell and ECB Chairman Christine Lagarde have to say about future rate hikes.
Rising interest rates reduced investment and strengthened the dollar, making dollar-denominated commodities more expensive for holders of other currencies.
Another downside pressure to consider is the UAE’s view that the current OPEC+ cuts are enough to stabilize the market.
Market participants in China expect Beijing to implement targeted stimulus measures to support its weakening economy, possibly boosting oil demand from the world’s 2nd consumer.
China’s state planner announced measures to encourage private investment in some infrastructure sectors on Monday and said it would also strengthen funding support for private projects.
Energy services firm Baker Hughes said on Friday that U.S. energy companies had made the deepest oil rig cuts since early June.
