Oil prices rise as markets assess declining inventories and possible Chinese support

Brent oil prices increased in Asian trading on Friday as markets assessed the potential of Chinese economic stimulus following disappointing economic data, decreasing stockpiles in the United States, and supply cuts from key producers.

Brent futures were up 63 cents to $80.27 a barrel at 0425 GMT, while WTI crude in the United States was up 62 cents to $76.27 a barrel. On Thursday, prices finished modestly higher.

Brent was expected to conclude the week up 0.5%, while WTI was expected to rise 1.1%, marking the fourth consecutive week of advances for both benchmarks.

Prices have been held back by China’s dismal economic data all week. The world’s second-largest oil consumer reported poor second-quarter GDP growth this week, raising the prospect of the economy falling short of the government’s 5% annual growth objective.

However, sentiment in commodity markets has risen on expectations that the central government will implement additional stimulus measures to boost the economy.

Beijing declared on Wednesday that it will develop strategies to stabilize growth in ten industries and strengthen support for private enterprises.

Recent data, notably lower-than-anticipated inflation and slowing job growth, have many investors and economists persuaded that the Federal Reserve’s expected July rate hike will be the last of its current tightening cycle.

Supply fundamentals have also helped to boost market optimism.

“Evidence of supply cuts from Saudi Arabia and Russia have been the trigger for the rebound in prices this month,” ANZ Bank analysts wrote in a client note.

Riyadh announced in early July that it will prolong a voluntary output cut of 1 million bpd into August, while Moscow announced that it would decrease exports by 500,000 bpd in August.

“That tightness in supply is already showing up in inventories,” according to ANZ.

The Energy Information Administration (EIA) said on Wednesday that US oil stockpiles declined last week, owing to an increase in crude exports as well as improved refinery utilization.

Key notes:

• Brent oil prices rose by 63 cents to $80.27 a barrel, while US West Texas Intermediate (WTI) crude climbed 62 cents to $76.27 a barrel. This marks a fourth consecutive week of gains for both benchmarks.
• China’s weak economic data, including disappointing second-quarter GDP growth, initially kept a lid on prices. However, hopes of additional stimulus measures by the Chinese government to support the economy have boosted sentiment across commodity markets.
• Recent data, such as lower-than-expected inflation and moderating job growth, have convinced many investors and analysts that the expected July rate hike by the Federal Reserve will be the last of its current tightening cycle. Supply cuts from Saudi Arabia and Russia, as well as falling US crude inventories, have also supported market sentiment.

Risk disclaimer:

Please note that this article does not offer any instructions or suggestions regarding investment decisions. It is important for you to conduct your own research or seek professional advice from a qualified professional before conducting an investment decision.