Oil prices climbed about 2% to a near three-month high on Monday, July 24, 2023, resulting from OPEC cuts in supply and hopes for Chinese stimulus measures.
At the start of this month, Saudi and Russia, the world’s biggest oil exporters, announced plans to cut an additional combined 1.5 million barrels per day, respectively, from their July production levels.
Read: Economic headwinds outweigh supply cuts, depress oil prices
Brent futures rose $1.67, or 2.1 percent, to settle at $82.74 a barrel, while U.S. WTI crude rose $1.67, or 2.1%, to settle at $78.74, with both benchmarks climbing steadily for four weeks in a row.
With the Federal Reserve making one more interest raise hike in its bid to reduce inflation, investors have priced in a potential quarter-point hike this week, the last increase of the current U.S. tightening cycle.
Higher interest rates increase borrowing costs and can slow economic growth and reduce oil demand.
Leaders in China, the world’s second-biggest oil consumer, pledged to step up policy support for the economy, focusing on boosting domestic demand with more stimulus actions.
Deutsche Bank analysts opined that demand for oil in China “is now surpassing expectations,” which “helps to add confidence in the ability of China to make up (two-thirds) of oil demand growth this year.”
This led to crude oil prices stabilizing near three-month highs on Tuesday.
U.S. crude futures traded 0.2 percent higher at $78.56 a barrel, while Brent contracts dropped 0.2 percent to $82.30.
The market focus will be on what Fed Chair Jerome Powell will announce about future rate increases amid expectations that this meeting will produce the central bank’s last hike of the year.
Ahead of the Fed announcement, oil traders will also await the release of the latest data on U.S. crude stockpiles.
The inventories are seen falling more than 2 million barrels during the week ended July 21.
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