Oil rose from its lowest level in almost three months as China weighed measures to kick start the world’s second-largest economy.
(Bloomberg) — Oil rose from its lowest level in almost three months as China weighed measures to kick start the world’s second-largest economy.
West Texas Intermediate futures climbed above $69 a barrel, after losing more than 7% over the previous three sessions. Global benchmark Brent also rallied 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. US inflation slowed in May, bolstering the case for a pause in Federal Reserve interest rate hikes and spurring risk assets.
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 Saudi Arabia’s pledge 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. 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.”
There’s been bumper activity this month in a key Middle East oil-pricing window, making it harder to assess the impact of deep oil production cuts in the region. Units of TotalEnergies SE and PetroChina Co are on opposite sides to Unipec, the trading arm of China’s largest refiner Sinopec, amid a flurry of trades in the so-called Dubai window, which sets the price of the region’s barrels.
Separately, Saudi Arabia’s latest oil production cuts are set to sharply tighten global markets next month, the Organization of Petroleum Exporting Countries indicated in its latest market report.
To get Bloomberg’s Energy Daily newsletter direct into your inbox, click here.
–With assistance from Yongchang Chin.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.