Oil prices were flat on Tuesday as concerns about possible US interest rate hikes could dampen demand, offset by concerns that a tropical storm on the US Gulf Coast could affect supply.
Brent crude was flat at $84.42 a barrel as of 03:35 GMT, while West Texas Intermediate (WTI) crude fell 2 cents to $80.08.
Investors are looking forward to key US economic data this weekend that will help determine the path interest rates will take this year and next. Jerome Powell said on Friday that the US central bank may need to raise interest rates further to cool stubborn inflation.
Markets are predicting an 80% probability of the Fed’s resistance next month, but the probability of a rate hike in November is currently roughly 56%.
It may be difficult for oil prices to maintain the strong bullish trend seen in July in today’s conditions. The US and European economies will face downward pressure until interest rates peak in the fourth quarter.
Therefore, it is inevitable that there will be a concern about demand, which may put pressure on oil prices. The Chinese economy has still not seen any significant improvement and oil prices may remain volatile at this stage. In case of an improvement in Chinese data, recovery may come.
China’s economic recovery has been hampered by the worsening real estate crisis, weak consumer spending, and falling credit growth. This led to lower key policy rates to support activity in the world’s second-largest economy and oil consumer.
Since the start of the third quarter following OPEC+’s production cuts, prices have risen by about 12 percent and 13 percent for Brent and WTI, respectively, but the outlook for the Chinese economy remains alarming.
Meanwhile, Tropical Storm Idalia hit western Cuba on Monday and nearly became a hurricane as it made its way toward Florida. The storm is likely to cause power outages and could affect crude production on the east side of the US Gulf Coast.
This week, the focus will be on the US personal consumption expenditures price index report, to be released on Thursday, and the nonfarm payrolls data for August, to be released on Friday.