Oil steadies as demand worries counter supply concerns

Oil prices were little changed on Tuesday as investors weighed the enduring possibility of another U.S. interest rate hike undercutting demand against supply concerns emanating from a hurricane hurtling towards the U.S. gulf coast.

Brent crude edged 28 cents higher at US$84.70 a barrel by 0820 GMT, while U.S. West Texas Intermediate crude ticked up 25 cents to US$80.35 a barrel.

While OPEC+ driven supply cuts bolstered prices by about 12% and 13% for Brent and WTI respectively, since the start of the third quarter global oil demand worries from the world’s two biggest economies – the U.S. and China – fester, analysts say.

Federal Reserve Chair Jerome Powell on Friday said the U.S. central bank may need to raise rates further to cool stubborn inflation.

Meanwhile, China’s post-pandemic economic recovery has sputtered due to a worsening property slump, weak consumer spending and tumbling credit growth, prompting Beijing to cut key policy rates to shore up activity in the world’s biggest oil importer.

Eyes are also on economic data from key economies later this week to help determine the path of interest rates this year and next.

“It may be difficult for oil prices to maintain the strong bull trend (seen) in July at this stage. The U.S. and European economies will face downward pressure in the fourth quarter until interest rates peak,” said CMC Markets analyst Leon Li.

On the supply side, Tropical Storm Idalia lashed western Cuba on Monday and was almost a hurricane as it headed toward Florida. The storm is likely to cause power outages and could impact crude production on the eastern side of U.S. Gulf Coast.

The jitters follow a fire at a Marathon Petroleum refinery last week, after a chemical leak ignited two giant storage tanks filled with volatile naphtha.

On Monday, the company said it planned to restart units at the 596,000-barrel-per-day (bpd) Garyville, Louisiana, refinery, the third largest in the United States.

“Such incidents will remain catalysts in upward movement as the oil community is currently very sensitive to interruptions to any refinery, anywhere in the world,” said John Evans of oil broker PVM.

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