Oil Rises From Three-Month Low as China Weighs Stimulus

Oil rose from its lowest level in almost three months as China weighed measures to kickstart the world’s second-largest economy.

(Bloomberg) — Oil rose from its lowest level in almost three months as China weighed measures to kickstart the world’s second-largest economy.

West Texas Intermediate futures climbed toward $68 a barrel, after losing more than 7% over the previous three sessions. Global benchmark Brent edged higher from its lowest close since December 2021. 

Some of crude’s sharp loss Monday was reversed as China tried to spur growth with an unexpected short-term interest rate cut on Tuesday. Beijing is also mulling a broad package of stimulus measures, according to people familiar with the matter.

Sluggish Chinese trade data, as well as international flights from Northeast Asia still far below pre-pandemic levels, highlight the lackluster recovery in the world’s biggest crude importer. Despite a pledge from Saudi Arabia to further cut output in July, key market gauges have pointed to weakness in recent days with a bearish contango structure creeping further along the futures curve. 

A slowdown in the US and resilient Russian exports are adding to the downward pressure, blunting Saudi Arabia’s recent decision to cut 1 million barrels a day of production. Goldman Sachs Group Inc. lowered its oil price forecasts for the third time in six months on Sunday, saying it sees supplies swelling and demand waning. 

“The last few days have shown how fragile sentiment is in the oil market,” UBS analyst Giovanni Staunovo wrote in a note. “For market participants to start building up long positions again, they likely need to see larger inventory declines.”

Still, there are signs of fresh physical demand, with US sour crude prices at their strongest in a year following the nation’s pledge to refill its strategic reserves. Also, moderating inflation in the US could prompt the Federal Reserve’s efforts to pause interest-rate hikes this week, which could buoy consumption.

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