Oil prices soared on Monday, closely following the bullish trend in stock markets, in a move that saw a significant uplift in global oil markets. This price surge comes after China took action to support its faltering economy. However, investors remain concerned about the pace of economic growth and the potential impact of rising U.S. interest rates, which could dampen demand for fuel.
As of 00:49 GMT, Brent Crude oil rose by 22 cents or 0.3%, reaching a price point of $84.70 per barrel. In a parallel climb, West Texas Intermediate (WTI) Crude was priced at $80.08 per barrel, up by 25 cents or 0.3%.
Tony Sekamore, an analyst at IG Markets, indicated that the oil sector benefited from optimistic signs in early trading after China halved its stamp duty on stock trading, starting Monday. This move is the latest attempt by Beijing to rejuvenate its struggling markets. “Unfortunately, following last week’s modest interest rate cut by China’s Central Bank, these announcements are another incremental step that is unlikely to change investors’ pessimism toward China,” said Sekamore.
He also pointed out that China’s industrial purchasing managers’ index (PMI), scheduled for release later this week, is likely to reveal more gloomy economic news about the world’s second-largest economy. The index is expected to remain in the contraction zone for the fifth consecutive month.
Adding to this sentiment, Tina Teng, an analyst at CMC Markets, mentioned that the “soft landing” scenario of the American economy gave a boost to the energy markets on Monday, despite the Federal Reserve’s insistence on continuing to raise interest rates.
Last Friday, both Brent and WTI Crude recorded losses for the second consecutive week. Jerome Powell, the Chair of the Federal Reserve, indicated that the U.S. Central Bank may need to raise interest rates more aggressively to tame persistently high inflation.
Nevertheless, oil prices have remained above $80 per barrel, supported by a decrease in oil inventories and supply cuts from OPEC+ oil producers. This delicate balance between the economic policies of major players like the U.S. and China will continue to influence the oil market, leaving investors on the edge of their seats.
The rise and volatility of oil prices offer not just a pulse check on global economic health, but also serve as a barometer for geopolitical stability and policy efficacy, thereby keeping all eyes keenly focused on the shifts and turns in the world’s oil markets.
