By Adedapo Adesanya
Oil appreciated on Monday after China took steps to bolster its slumping economy, with Brent increasing by 65 cents or 0.8 per cent to $85 per barrel, as the US West Texas Intermediate (WTI) gained 45 cents or 0.6 per cent to sell for $80.28 per barrel.
The focus of the oil market was on China’s actions to support its economy as the world’s largest economy halved the stamp duty on stock trading effective Monday in the latest attempt to boost the struggling market.
According to Reuters, the finance ministry, in a brief statement on Sunday, said it was reducing the 0.1 per cent duty on stock trades “in order to invigorate the capital market and boost investor confidence.”
The country has taken a series of measures, including a smaller-than-expected cut in a key lending benchmark last week. However, investors are demanding a stronger policy response, including massive government spending.
Possible disruptions from Tropical Storm Idalia heading for Florida, US, also boosted the market.
Idalia was intensifying as it approached Cuba, according to the latest update. Its most likely impact is a day or two of power outages, and analysts noted that it could add some short-term support for the price of oil.
Meanwhile, pressure remains after Federal Reserve Chair Jerome Powell said the US central bank may need to raise rates further to cool still-too-high inflation.
Speaking last Friday, he promised that the Federal Reserve would move with care at upcoming meetings as he noted both progress made on easing price pressures as well as risks from the surprising strength of the US economy.
According to analysts, Powell’s remarks still delivered a blow, with investors now seeing one more rate hike by year-end more likely than not.
The US Federal Reserve has raised rates by 5.25 percentage points since March 2022, and inflation by the US Federal Reserve preferred gauge has moved down to 3.3 per cent from its peak of 7 per cent last summer. Although the decline was a welcome development, inflation still remains too high, according to the central bank head.
Oil prices have remained above $80 a barrel with support from falling oil inventories and supply cuts from the Organisation of the Petroleum Exporting Countries and its allies (OPEC+).
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 provide further support for the market.
Modupe Gbadeyanka