On Monday, oil prices increased, recovering from recent declines in an attempt to improve economic conditions in China after cutting borrowing costs.
West Texas Intermediate crude oil futures for September delivery went up by 0.47% to $79.01 per barrel. Also, Brent contracts jumped by 0.51% to $83.05 a barrel on July 22’s Asian afternoon session.
The two contracts were bouncing back from deep losses last week, with over a 3.00% dip amid Israel-Hamas ceasefire speculations. Monday’s highs came after the price went down after journalists suggested that talks between the two could continue as soon as this week.
Meanwhile, China slashed interest rates to boost its economy. The top fuel importer improved after unexpectedly lowering its benchmark loan prime rates (LPR) while facing challenges from sluggish economic growth.
Cutting interest rates followed the data reporting the country’s weaker-than-expected acceleration in the second quarter. As a result, it raised concerns over a potential downturn in crude oil demand.
Moreover, Beijing aims to open more stimulus measures to solidify growth as Monday’s cuts are approaching. However, China’s LPR is already hitting record lows as it aggressively loosened monetary policy over the last two years to supplement growth.
On the other hand, the potential for increased liquidity in the Chinese economy supports some near-term growth, benefitting its oil demand.
US Rate Cuts to Spike Oil Prices
In early July 22’s trade, oil prices rose while investors braced for signs of a rate-cut cycle anticipated to start as soon as September.
According to experts, inflation and the labor market data hinted that disinflation and market rebalancing could occur. This move will allow the US Federal Reserve to begin its cutting cycle.
Moreover, the Fed will hold another meeting on interest rates at the end of July, wherein investors anticipate unchanged rates. Lower rates could benefit the price of crude oil.
