Oil prices saw on Tuesday a slight increase, building upon the gains observed in the previous session. This was driven by two factors: China, the leading oil importer, signaling its intentions to implement fiscal stimulus measures, and the threat of wildfires in Canada nearing important oil hubs in the country.
However, the anticipation of crucial U.S. inflation data, which is expected to impact interest rates, limited the extent of the price surge.
Additionally, the recent strengthening of the dollar exerted additional pressure on the oil market.
Brent oil futures, set to expire in July, rose by 0.3 percent to reach $83.59 per barrel.
Meanwhile, West Texas Intermediate (WTI) crude futures increased by the same percentage to reach $78.85 per barrel at 20:40 ET (00:40 GMT).
Both contracts had recorded gains of over 1 percent each on the previous day.
Read more: Oil prices inch lower on concerns about Chinese imports, U.S. inflation
In an attempt to stimulate its sluggish economy, China’s finance ministry announced plans to raise 1 trillion yuan ($138 billion) through a long-awaited bond issuance.
The issuance will primarily target key sectors of the Chinese economy, with special government bonds, ranging from 20 to 50 years in tenor, being issued.
These bonds will be utilized to support areas such as infrastructure, contributing to the country’s economic growth.
The confirmation of the bond issuance, although largely anticipated, brought about a sense of optimism regarding the improvement of economic conditions in China, the world’s largest oil importer.
This development followed mixed inflation readings over the weekend, which raised concerns about the sustainability of the Chinese economic recovery.
While consumer inflation increased, producer inflation experienced its 19th consecutive month of contraction.
Potential risk to oil and gas supplies in Western Canada
Meanwhile, major wildfires in Western Canada posed a potential risk to oil and gas supplies, particularly as they approached a crucial oil hub.
Fortunately, rainfall in the region helped reduce the immediate threat from the fires, although residents remained on high alert.
The intensification of the wildfires has the potential to disrupt Canada’s substantial oil and gas industry, which plays a vital role in North American crude markets.
In 2023, Canada experienced its worst-ever wildfire season, resulting in the loss of up to 300,000 barrels of daily production.
Furthermore, the wildfires in 2016 caused damage to Fort McMurray, leading to the shutdown of approximately 1 million barrels per day of oil production.
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