Oil prices rose on Tuesday as China unexpectedly lowered key policy rates for the second time in three months to bolster the economic recovery. Because industrial production and retail sales data showed that the economy slowed even more last month.
Brent crude futures were up 32 cents, or 0.4%, to trade at $86.53 a barrel as of 0644 GMT. West Texas Intermediate crude (WTI) rose 26 cents, or 0.3%, to $82.77 a barrel.
Prices rose after the People’s Bank of China (PBOC) cut the rate of one-year medium-term loans to some financial institutions by 15 basis points to 2.5%.
The PBOC said the cash injection was to “keep the banking system liquidity reasonably abundant” to neutralize factors, including tax payments.
The market expected the PBOC to wait until September before easing again, which indicates growing concerns from officials about the state of the macroeconomics.
China’s industrial production and retail sales data released Tuesday showed the economy slowed further last month, adding to the pressure on already faltering growth and prompting officials to cut key policy rates to bolster activity.
Despite weak macroeconomic data, China’s oil appetite has resisted. In July, the country’s refinery output increased by 17.4% year-on-year as refineries kept production high to meet domestic summer travel demand and cash out profit margins by exporting fuel.
Supporting oil prices, Japan’s economy grew much faster than expected from April to June as fast auto exports and tourism helped offset the slowing consumer recovery post-COVID.
Meanwhile, oil and gas production from the US’s top shale-producing regions is expected to drop to its lowest levels since May for the second consecutive month in September, according to Energy Information Administration (EIA) data on Monday.
Falling US production could exacerbate the global oil supply tightness caused by the Organization of the Petroleum Exporting Countries and its allies known as OPEC+ cut production.
