Get 40% Off
🔥 This hedge fund gained 26.16% in the last month. Get their top stocks with our free stock ideas tool.See stock ideas

Oil prices settle more than 3% higher after China rate cut

Published 06/11/2023, 09:06 PM
Updated 06/13/2023, 05:11 PM
© Reuters. A view shows an oil pump jack outside Almetyevsk in the Republic of Tatarstan, Russia June 4, 2023. REUTERS/Alexander Manzyuk
LCO
-

By Stephanie Kelly

NEW YORK (Reuters) -Oil prices climbed over 3% on Tuesday on hopes for growing fuel demand after China's central bank lowered a short-term lending rate for the first time in 10 months, boosting crude prices after steep losses the previous session.

The rate cut is aimed at adding momentum to a hesitant post-pandemic recovery in the world's second-largest economy and biggest crude importer.

Brent crude futures settled up $2.45, or 3.4%, to $74.29 a barrel. U.S. West Texas Intermediate (WTI) crude gained $2.30, or 3.4%, at $69.42 a barrel.

On Monday, crude prices fell by about 4%, in part because of concerns about the Chinese economy after disappointing economic data last week.

"The market is showing a rebound from yesterday," Phil Flynn, an analyst at Price Futures group, said. "It was overdone with doom and gloom on Monday."

Equities, which often trade in tandem with oil, also rose on Tuesday.

Brent's six-month backwardation, a market structure whereby shorter-dated futures trade above longer-dated ones, fell to its lowest since March at around $1.10, indicating faltering confidence that demand will exceed supply over the year.

"For market participants to start building up long positions again, they likely need to see larger inventory declines," said UBS strategist Giovanni Staunovo, adding he expected this to happen within weeks.

A rise in global supplies is weighing on the market, along with concerns about demand growth, ahead of a U.S. Federal Reserve policy meeting concluding on Wednesday.

Most market participants expect the Fed to leave interest rates unchanged, especially after data showed U.S. consumer prices barely rose in May.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

The Fed's rate hikes have strengthened the dollar, making oil more expensive for holders of other currencies.

The European Central Bank is expected to hike interest rates on Thursday.

Worries about demand have unravelled the temporary boost in oil prices from Saudi Arabia's pledge announced early this month to cut more production in July.

The Organization of Petroleum Exporting Countries (OPEC) kept its forecast for 2023 global oil demand growth steady for a fourth month on Tuesday, slightly increasing expectations of Chinese demand growth.

Another monthly report by the International Energy Agency (IEA) due on Wednesday will provide further trading cues.

U.S. crude oil rose by about 1 million barrels in the week ended June 9, according to market sources citing American Petroleum Institute figures on Tuesday, contrary to the average estimate for a 1.3 million barrel decline according to five analysts polled by Reuters.

Government data on stockpiles is due on Wednesday.

Latest comments

So oil now is a garbage, can be bargained
Oil price fall as nervous investors wait for Fed rate decision but stocks rally ....
nonsense. when it comes to oil, rates will hike. when it comes to stocks, rates will pause. how does this make any sense? stocks are over bought, oil is selling lower than pump cost
 Its more like big money has paused buying oil until fed news. So less buyers than seller in the market right now, that's all. Tomorrow API numbers should show another week of draw down.
according to the commodities market there will be rate hike but the equities still price cuts
cheap oil is good for global economy and deflation
Oil always edges lower for everything.
traders are very aware of the stupidity of the production cuts by the Saudis, and the creation of more market share and an increase of production for the American producers.....
crude must hold the $69 dollar level ....if it can't, then a high probability of retest of $63 could come into play....
Bears just watch out!
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.