China hopes that restricted supply will cause oil prices to rise

25 Jul 2023 , 11:05 AM

Tuesday saw a little increase in oil prices, building on gains from the previous session as evidence of tighter supply and promises from Chinese authorities to support the country’s second-largest economy boosted confidence.

Brent futures were up 7 cents at $82.81 a barrel, while WTI crude in the United States was up 11 cents at $78.85.

The previous day, both benchmarks increased by more than 2%, reaching their biggest closes since April.

The Organization of the Petroleum Exporting Countries (OPEC) and allies like Russia, a group known as OPEC+, have already curtailed production, which has caused the oil benchmarks to rise for four weeks in a row. Supplies are anticipated to tighten as a result.

Leaders in China, the second-largest economy and oil user in the world, promised to intensify policy assistance for the economy amid a difficult post-COVID recovery, concentrating on increasing domestic demand.

However, gloomy news from the US and the Eurozone highlighted weakness in the global economy.

Business activity in the euro zone decreased significantly more than anticipated in July as demand in the region’s main services sector decreased and factory output decreased at the highest rate since the start of COVID-19, according to a survey.

According to closely watched survey data, business activity in the United States slowed to a five-month low in July due to sluggish service sector expansion. However, falling input prices and slower hiring suggest the Federal Reserve may be making progress in its effort to lower inflation by slowing down some key fronts.

The focus will be on what Fed Chair Jerome Powell and ECB President Christine Lagarde say about future rate increases since investors have priced in quarter-point hikes from the Fed and European Central Bank (ECB) this week. 

Industry data on American crude inventories is anticipated later on Tuesday. According to four analysts surveyed by Reuters, oil inventories decreased by around 2 million barrels in the week ending July 21.

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