Crude oil prices experienced an upswing on Tuesday, benefiting from increasing expectations of additional stimulus measures in China, the world’s largest crude importer. Positive comments from OPEC regarding future demand also contributed to the market’s bullish sentiment.
At 09:20 ET (13:20 GMT), U.S. crude futures were trading 0.9% higher at $73.59 per barrel, while the Brent contract saw a 0.7% climb to $78.24.
China’s People’s Bank revealed that new bank loans in June surpassed expectations, reflecting Beijing’s efforts to boost demand after three years of COVID-19 restrictions.
In a bid to support the property sector, China’s central bank extended some policies from a November rescue package until the end of 2024. Traders are now expecting further stimulus measures to revive the world’s second-largest economy, which is struggling to recover from the impact of the COVID-19 pandemic.
These developments have reinforced the market’s positive trajectory following the supply reductions announced by leading exporters Saudi Arabia and Russia for August last week.
OPEC Optimistic about Demand:
Haitham Al Ghais, the Secretary General of OPEC, stated on Tuesday that global demand for all types of energy is projected to increase by 23% through 2045. He emphasized the need for innovative solutions, including carbon capture utilization and storage, hydrogen projects, and the establishment of a circular carbon economy, which received endorsement from the G20.
Potential Pressure from U.S. CPI:
In the United States, the largest energy consumer globally, the power grid operator in Texas predicted a new round of record-breaking electricity usage as residents contend with a summer heatwave.
The focus this week, however, will be on the release of the latest inflation figures in the U.S., which could impact the thinking of Federal Reserve officials prior to the upcoming policy-setting meeting later this month.
“This is significant for the markets, as it will shape expectations regarding monetary policy from the U.S. Fed in the coming months. A reading above the year-on-year consensus (3.1%) would likely exert pressure on risk assets,” noted analysts at ING in a statement.
Comments made by several Federal Reserve officials on Monday raised speculations that the central bank may be nearing the end of its rate-hiking cycle, leading to a two-month low for the U.S. dollar. A weaker dollar typically makes crude oil more affordable for holders of other currencies and often stimulates oil demand.
Later today, the Energy Information Administration will publish the short-term energy outlook, along with industry data from the American Petroleum Institute, which will provide further details about U.S. crude inventories.
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