Oil prices rose slightly in early Asian trade on Monday as focus turned to economic readings from the world’s largest oil importer due this week, with U.S. oil futures within sight of the key $80 a barrel level.
Prices were still nursing two straight weeks of losses, as hawkish signals from the Federal Reserve and signs of rising U.S. production curbed optimism over major supply cuts by Saudi Arabia and Russia.
China, the world’s largest oil importer, announced more measures over the weekend aimed at supporting the stock market and the property sector. While the actual economic effects of the new measures are expected to transient, analysts said the new policies signaled that Beijing was still ready to roll out more economic support.
Optimism over more Chinese stimulus helped markets look past hawkish, albeit reiterative statements from Federal Reserve Chair Jerome Powell on Friday. Powell warned that interest rates will likely need to rise further to curb sticky inflation.
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Powell’s comments put the dollar at a near three-week high, which limited any major gains in oil prices.
Brent oil futures rose slightly to $83.97 a barrel, while West Texas Intermediate crude futures rose 0.1% to $79.94 a barrel by 21:10 ET (01:10 GMT). Both contracts fell nearly 2% each last week.
Beijing unveiled more measures aimed at supporting the property sector, as well as equity markets, over the weekend. The move helped spur some optimism over an economic recovery in the world’s largest oil importer, which is struggling with an otherwise sharp slowdown in growth.
Focus this week is largely on purchasing managers’ index (PMI) data for August, due on Thursday. The data is expected to show that China’s massive manufacturing sector remained in contraction for a fourth straight month, bringing down overall business activity.
While Beijing’s latest batch of supportive measures offered some relief, traders have grown largely impatient with the government’s otherwise hesitant approach towards rolling out more economic support.
This notion, particularly a smaller-than-expected interest rate cut by the People’s Bank last week, had also weighed on oil markets.
Strength in the dollar, which was trading close to three-month highs, limited any major gains in oil prices on Monday.
The dollar was boosted by a hawkish outlook from the Fed’s Powell, who warned that interest rates could still rise further to curb sticky inflation.
Still, Powell also noted that the U.S. economy was not cooling as expected, which could keep activity and crude demand in the world’s largest fuel consumer elevated in the near-term.
But U.S. fuel demand is also expected to slow in the coming months, as the travel-heavy summer season comes to an end. - investing.com