Oil steady as possible rate hikes stoke demand worry, storm could hit supply
3:15 pm Monday, August 28th, 2023
By Arathy Somasekhar
HOUSTON (Reuters) -Oil prices held steady on Monday, pressured by worries further U.S. interest rate hikes could dent demand but supported by the potential of a supply disruption from a tropical storm off the U.S. Gulf Coast.
Brent crude settled 6 cents lower at $84.42 a barrel, after touching a session high of over $85 earlier in the day. U.S. West Texas Intermediate crude was 27 cents, or 0.3%, higher at $80.10.
On Friday, crude posted a second week of losses after Federal Reserve Chair Jerome Powell said the U.S. central bank may need to raise rates further to cool stubborn inflation.
“There are concerns still about demand going to lighten especially if we see another click higher in interest rates, the market is very nervous,” said Dennis Kissler, senior vice president of trading at BOK Financial.
Personal consumption expenditures price index, the Fed’s preferred inflation gauge, is set for release on Thursday and non-farm payrolls data is due on Friday.
China halved stamp duty on stock trading, but Chinese stock markets erased most of their strong opening gains on nagging worries about a stuttering economy.
The oil market’s focus is on “China actions to support its economy, Tropical Storm Idalia heading for Florida and whether Brent can regain momentum on a break above $85,” said Ole Hansen, head of commodity strategy at Saxo Bank.
Tropical Storm Idalia was expected to intensify into a major hurricane on Monday as it barrelled toward Florida’s Gulf Coast. Some worried it could hit the eastern side of U.S. Gulf Coast crude production.
Idalia most likely impact was a day or two of power outages, said IG market analyst Tony Sycamore. That “should see some short-term support for the oil price”, he said.
Oil prices have remained above $80 a barrel with support from falling oil inventories and supply cuts from the OPEC+ group of oil producers.
Saudi Arabia is expected to extend a voluntary oil output cut of 1 million barrels a day into October, analysts told Reuters last week, as the kingdom seeks to further support the market.
(Additional reporting by Alex Lawler in London, Florence Tan and Sudarshan Varadhan; editing by Jason Neely, Kirsten Donovan, Louise Heavens, Sharon Singleton, David Gregorio and Tomasz Janowski)
