Oil prices continued their upward trajectory for the third consecutive session on Tuesday, buoyed by signs of tightening supplies and assurances from Chinese authorities to support the world’s second-largest economy.
Brent future (BRN!) recorded a 0.3% increase, gaining 22 cents to reach $82.96 a barrel by 0253 GMT, while U.S. West Texas Intermediate (WTI) crude rose by the same percentage, adding 23 cents to settle at $78.97. The positive momentum had begun the previous day, with both benchmarks surging over 2% and achieving their highest closing levels since April.
The continuous climb in crude prices has extended for four weeks in a row, with analysts predicting further rises in the short term. The expected decrease in oil supplies is a result of concerted efforts by OPEC and its allied countries, including Russia, forming the coalition known as OPEC+. These nations have implemented cuts in oil production to address market dynamics and regulate the availability of crude oil in the global market.
Edward Moya, an analyst at OANDA, expressed that energy traders are gaining confidence in the nearing end of global central bank tightening, which is expected to provide support for overall global growth.
In China, the leaders of the second-largest economy and one of the world’s largest oil consumers pledged to intensify policy support to strengthen the economy amid the challenges of post-COVID recovery. Their focus is on boosting domestic demand to stimulate economic growth.
Euro Zone and U.S. Economic Weakness
However, global economic weaknesses were underscored by bearish data in both the eurozone and the U.S. In the eurozone, business activity in July declined more than expected, particularly in the bloc’s dominant services industry, while factory output experienced its fastest pace of decline since the onset of the COVID-19 pandemic.
Similarly, business activity in the U.S. slowed to a five-month low in July, mainly due to a deceleration in the growth of the service sector. Nonetheless, falling input prices and slower hiring have indicated that the Federal Reserve could be making progress in its efforts to reduce inflation.
Investors are keeping a close eye on the actions of the Federal Reserve and the European Central Bank (ECB), given that they have already considered the possibility of quarter-point rate hikes during this week. The focus is on statements made by Fed Chair Jerome Powell and ECB President Christine Lagarde concerning future rate increases.