Climbing Oil Prices: Tighter Supply Meets China's Rising Expectations – Here's the Scoop!

Tuesday saw an upswing in oil prices, building on the momentum from the previous trading session, buoyed by indications of tightening supplies and China's commitment to bolstering its economy, the world's second-largest.

Brent futures nudged up by 7 cents, touching $82.81 a barrel at 00:07 GMT, while the U.S. West Texas Intermediate (WTI) crude experienced an 11 cent rise, settling at $78.85.

Both benchmarks had surged by over 2% the day before, hitting their peak since April.

With consecutive four-week climbs, the crude benchmarks are geared for further elevation, anticipating tightening supplies owing to production cuts from the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, collectively known as OPEC+.

In a bid to stimulate the economy amidst a challenging post-COVID recovery, leaders in China, the world's second-largest economy and oil consumer, have promised to enhance policy support, with a particular focus on boosting domestic demand.

However, discouraging data from the euro zone and U.S. highlight the persistent weakness spanning the global economy.

July saw the euro zone grappling with a steeper-than-expected contraction in business activity, driven by a dip in demand in the key services sector, while factory output witnessed its sharpest fall since the onset of COVID-19, as revealed by a survey.

Simultaneously, the U.S. experienced a slowdown in business activity to a five-month low in July, weighed down by a slowing service-sector growth, according to a widely observed survey. Nonetheless, lower input prices and slowing hiring could signify strides by the Federal Reserve towards its goal of mitigating inflation.

With quarter-point hikes from the Federal Reserve and European Central Bank (ECB) already factored in by investors this week, all eyes will be on the Federal Reserve Chair Jerome Powell and ECB President Christine Lagarde for insights into future rate hikes.

Industry data on U.S. crude inventories, due later on Tuesday, will be watched closely. An average estimate by four analysts polled by Reuters suggests a fall of about 2 million barrels in crude inventories for the week ending July 21.

Source : Reuters (Reporting by Stephanie Kelly)