Oil prices dip amid economic concerns and rate hike fears

WEB DESK: Oil prices experienced a slight decline on Monday, primarily driven by concerns about China’s economic growth and the potential impact of further interest rate hikes in the United States, which could curtail fuel demand.

According to Business Recorder, as of 0330 GMT, Brent crude dropped by 8 cents, or 0.1 per cent, settling at $84.40 per barrel. Similarly, US West Texas Intermediate (WTI) crude slipped 5 cents, also 0.1 per cent, to reach $79.78 per barrel.

The previous week witnessed both Brent and WTI suffering losses after remarks by Federal Reserve Chair Jerome Powell indicating the possibility of additional interest rate hikes to address persistent inflation concerns.

Early Asian trading saw a temporary boost in oil prices due to China’s decision to cut stamp duty on stock trading by half, aiming to bolster struggling markets. However, this effect was short-lived, and prices started to retreat.

Despite the Chinese central bank’s recent modest interest rate cut, the measure was perceived as insufficient to alter investor pessimism towards China.

Anticipation is high for China’s upcoming release of the manufacturing purchasing managers’ index (PMI) data, which is likely to reflect continued economic challenges in the world’s second-largest economy. Sycamore predicted that the PMI would likely show contraction for the fifth consecutive month.

In the US, the energy sector reduced the number of active oil rigs for the ninth consecutive month in August, as reported by Baker Hughes.

On a different note, the emergence of Tropical Storm Idalia in the Caribbean has raised concerns of a potential hurricane hitting Florida. While this storm isn’t expected to impact oil and gas centers in the Gulf significantly, some short-term support for oil prices may arise due to potential power outages.

However, ANZ Research pointed out that the narrative of tightening supply, driven by falling oil inventories and supply cuts from the OPEC+ alliance, has been undermined by prospects of eased sanctions on Iran and Venezuela, contributing to the erosion of this narrative.