Oil prices remained steady on Tuesday, staying close to their three-month highs amid signs of tighter supplies and reassurances from Chinese authorities about bolstering their economy. Brent futures were down slightly at $82.70 a barrel, while U.S. West Texas Intermediate (WTI) crude held steady at $78.74. These crude benchmarks are poised for their fifth consecutive weekly gain as output cuts from the Organization of the Petroleum Exporting Countries (OPEC) and its allies are expected to tighten supplies.
The oil market also reflected tight supply conditions, with earlier-loading Brent contracts selling above later loadings, a price structure known as backwardation. This indicates that traders believe supplies are constrained, with the six-month spread nearing a two-and-a-half month high.
Investors will be paying close attention to industry data on U.S. crude inventories, expected to be released later, to gauge the supply-demand balance. Analysts anticipate that crude inventories fell by approximately 2 million barrels in the week to July 21.
In China, the world’s second-largest economy and second-biggest oil consumer, leaders have pledged to provide stronger economic policy support. This promises potential stability and growth for oil demand in the region.
However, weaker economic data from Western nations contributed to a cautious sentiment in the oil market. Business activity in the eurozone contracted more than expected in July, while business activity in the U.S. slowed to a five-month low. Despite this, falling input prices and slower hiring indicate that the Federal Reserve might be making progress in its efforts to reduce inflation.
A temporary setback for the oil market came with news that a 110,000 barrel-per-day unit at a significant U.S. refinery in Baton Rouge will be shut for up to four weeks, further tightening supplies.
Looking ahead, investors have already factored in expected quarter-point interest rate hikes from both the Federal Reserve and the European Central Bank this week. Market participants eagerly await statements from Fed Chair Jerome Powell and ECB President Christine Lagarde regarding future rate increases.
In conclusion, oil prices remained steady as signs of tighter supplies and reassurances from Chinese authorities regarding their economy lifted market sentiment. Despite weaker economic data from Western economies, the oil market is poised for further gains, supported by output cuts from OPEC and its allies. Investors will closely monitor U.S. crude inventories to gauge supply levels, while also paying attention to central bank statements in the coming week.
