Crude Oil Appreciates as China Moves to Ease Concerns

By Adedapo Adesanya

Crude oil rose on Thursday after falling for three straight sessions, as it outweighed a weaker US Dollar while China’s central bank sought to bolster the economy following recent concerns.

The international crude benchmark, Brent crude futures, rose 67 cents or 0.8 per cent to $84.12 a barrel, while the US West Texas Intermediate crude (WTI) was up $1.01 or 1.3 per cent at $80.93 a barrel.

Worries about China’s embattled economy and the potential for further increases in U.S. interest rates have depressed the market in the last few days but moves by the Chinese government have shown support.

China’s central bank, the People’s Bank of China,  said it would keep liquidity reasonably ample and maintain “precise and forceful” policy to support economic recovery against headwinds.

It said it would leverage on the dual functions of aggregate and structural monetary policy tools and firmly support the recovery and development of the real economy.

This is as it unexpectedly cut key benchmark interest rates for the second time in three months on Tuesday in a bid to support a sputtering economic recovery. The markets widely expect the bank to loosen monetary policy further.

The country’s central bank acknowledged that the world’s second-biggest economy is facing “insufficient demand and challenges such as difficult business operations and high risks and hidden dangers in key areas” amid “deglobalisation risks” and a weakening global recovery.

In response to a deepening property market crisis, China’s central bank also said it would adjust and optimize property policies in a timely manner.

The US Dollar index slipped off a two-month high the day after US Federal Reserve meeting minutes left the door open for more rate hikes, and data this week indicated a resilient US economy.

Higher interest rates increase borrowing costs, which could slow economic growth and reduce oil demand.

China also made a rare draw on crude oil inventories in July, the first time in 33 months it has dipped into storage.

Data released on Wednesday showed that US crude oil inventories fell by nearly 6 million barrels last week on strong exports and refining run rates.