Oil prices saw gains in Asian trading on Monday, marking a rebound after experiencing their first negative week in four. The prospect of tighter supplies played a significant role in boosting oil prices, offsetting concerns surrounding a potential slowdown in demand.
Crude oil prices had concluded the previous week with a decline of approximately 0.8%, primarily due to the impact of hawkish messaging from the Federal Reserve. The central bank had indicated the possibility of higher interest rates persisting for an extended duration. Additionally, the strength of the US dollar, which reached six-month highs, exerted further downward pressure on oil prices.
Despite these factors, oil price losses remained limited, driven by the anticipation of tighter supplies. Russia, in an effort to address escalating domestic gasoline prices, temporarily suspended the majority of its fuel exports. Although Moscow described this measure as temporary, it is expected to significantly tighten global oil markets in the coming weeks. This tightening is a result of production cuts totaling 1.3 million barrels per day, implemented jointly by Russia and Saudi Arabia for the remainder of the year. These production cuts sparked a rally in oil prices of over 15% during the past month and are projected to maintain crude oil prices within the range of $90 to $100 per barrel for the remainder of the year.
Brent oil futures exhibited a 0.3% increase, reaching $92.22 per barrel, while West Texas Intermediate crude futures also rose by 0.3% to $90.30 per barrel as of 20:19 ET (00:19 GMT). Both contracts had retreated from a 10-month high during the previous week.
Inflation Data Awaited, Market Monitors Oil-Driven Inflation Concerns
Market participants are now anticipating a series of significant economic data releases for the week, including inflation data from Singapore, Australia, Germany, and Japan for the month of September. These readings are closely watched amid growing apprehensions that the surge in oil prices may trigger a resurgence in inflation, prompting more hawkish actions by central banks worldwide.
August inflation data from several major economies revealed a renewed uptick in inflation this year, with fuel prices contributing to higher living costs. The Federal Reserve also expressed concerns about this scenario during its recent meeting.
In addition to the inflation data, market attention is directed towards addresses by several Federal Reserve members, with particular emphasis on Chair Jerome Powell’s speech scheduled for Friday. Powell is widely expected to reaffirm the central bank’s stance on maintaining higher interest rates for an extended period and may provide further insights into the recent resurgence in inflation.
China PMIs Awaited Amid Ongoing Stimulus Speculation
Oil markets also received support from the potential for additional stimulus measures in China, the world’s largest oil importer.
Reports emerged last week suggesting that China was planning to further relax regulations governing foreign investment and improve lending and liquidity conditions in the property sector.
This week, market focus centers on the release of purchasing managers’ index (PMI) data for September, following indications of improvement, particularly in the manufacturing sector, in the August PMIs.
