Oil steadies as China moves to support economy, tropical storm in focus

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London, Aug. 28, 2023 – Oil was little changed on Monday after China took steps to bolster its flagging economy, though investors remained worried about the pace of growth as well as further U.S. interest rate hikes that could dampen demand.

China halved stamp duty on stock trading in its latest attempt to boost struggling markets. The market is also keeping an eye on Tropical storm Idalia and any risk it poses to oil and gas output in the U.S. Gulf.

Brent crude slipped 15 cents, or 0.2%, to $84.33 a barrel by 1045 GMT, with an earlier rally fizzling out just short of the $85 mark. U.S. West Texas Intermediate crude gained 5 cents to $79.88.

The focus today is on “China actions to support its economy, Tropical Storm Idalia heading for Florida and whether Brent can regain momentum on a break above $85,” said Ole Hansen, head of commodity strategy at Saxo Bank.

Idalia was intensifying as it approaches Cuba, according to the latest update. Its most likely impact is a day or two of power outages, said IG market analyst Tony Sycamore. That “should see some short-term support for the oil price”, he said.

Brent and U.S. crude posted a second week of losses on Friday after Fed Chair Jerome Powell said the U.S. central bank may need to raise rates further to cool still-too-high inflation.

Still, CMC markets analyst Tina Teng said a soft-landing scenario for the U.S. economy buoyed energy markets on Monday, despite the Federal Reserve’s hawkish stance on rate hikes.

Oil prices have remained above $80 a barrel with support from falling oil inventories and supply cuts from the OPEC+ group of oil producers.

Saudi Arabia is expected to extend a voluntary oil output cut of 1 million barrels a day into October, analysts told Reuter last week, as the kingdom seeks to provide further support for the market. (Reuters)

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