Oil prices remained stable as worries about demand in top importer China countered the support from strong demand elsewhere, OPEC’s supply restraint, and geopolitical tensions in the Middle East, on Monday.
The broader market’s reaction to the attempted assassination of former U.S. President Donald Trump was closely watched. The U.S. dollar steadied after earlier gains that had put pressure on oil prices.
By 1326 GMT, Brent crude futures were up 3 cents at $85.06 a barrel, while U.S. West Texas Intermediate crude rose by 7 cents to $82.28.
“Crude oil prices experienced significant volatility last week, slipping from their highs after four consecutive weeks of gains. Concerns over Chinese demand and higher-than-expected U.S. Producer Price Index (PPI) and core PPI data contributed to the decline in oil prices. Once again, Chinese economic data released last week was disappointing, exacerbating worries about crude oil demand. Chinese imports of crude oil were down by 11% year-on-year. Also, U.S. consumer sentiment declined to 66.0, below the expected reading of 68.5, further pressuring oil prices. However, weakness in the dollar index, lower U.S. 10-year bond yields, and increased expectations of Federal Reserve rate cuts in the September policy meeting supported crude oil prices at lower levels. We anticipate crude oil prices to remain volatile this week, influenced by fluctuations in the dollar index and ahead of the ECB policy meetings. Specifically for today’s session, crude oil prices are expected to continue their volatility. Crude oil has support at $80.50-79.70 and resistance at $81.70-82.20,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.
What’s weighing on crude oil prices?
Crude oil prices declined last week following four consecutive weeks of gains, as optimism about robust U.S. summer demand was tempered by concerns over weakening demand in China.
Chinese economic data released on Monday contributed to these concerns. Official figures revealed that the world’s second-largest economy grew by 4.7% in the April to June quarter, marking its slowest growth since the first quarter of 2023. Additionally, separate figures on Friday indicated a 2.3% decline in China’s crude oil imports for the first half of the year.
Despite these factors, the volatile geopolitical situation in the Middle East continues to lend support to oil prices, although analysts note that ample spare capacity held by Saudi Arabia and other OPEC members has limited this upward pressure.
Furthermore, the oil market remains bolstered by ongoing supply cuts from the OPEC group of producers. Over the weekend, Iraq’s oil ministry announced plans to offset overproduction that occurred since the beginning of 2024.
Later in the day, Federal Reserve Chair Jerome Powell is scheduled to speak, during which he is expected to comment on last week’s subdued inflation data. Market expectations for a Fed rate cut in September have risen to 96%, up from 72% a week earlier.