Oil prices rose on Monday as tightening supply and hopes for Chinese stimulus underpinned Brent at well above $80 a barrel, even as traders expected more rate hikes from U.S. and European central banks.
Brent crude futures were up 45 cents, or 0.6%, at $81.52 a barrel. U.S. West Texas Intermediate (WTI) crude was at $77.55 a barrel, also up 48 cents, or 0.6%.
The benchmarks rose 1.5% and 2.2% respectively last week, their fourth straight of week of gains, as supply is expected to tighten following OPEC+ cuts.
Fighting also escalated last week in Ukraine after Russia withdrew from a U.N.-brokered safe sea corridor agreement for grain exports.
Oil’s rise has reflected “tightening conditions as Saudi oil output cuts impact the market… even as summer demand has been somewhat stronger for gasoline and jet fuel”, Citi Research said in a note.
The bank said it sees some upside for oil over the summer and forecast an average price in the third quarter of $83 a barrel.
“While another Fed rate hike this week may drive some short-term price volatility, we expect tightening market conditions on OPEC’s supply cuts and increasing market speculation of further stimulus in China to continue to push prices higher through 3Q23,” analysts from National Australian Bank said in a note.
Investors have priced in quarter-point hikes from the Federal Reserve and European Central Bank this week, so the focus will be on what Fed Chair Jerome Powell and ECB President Christine Lagarde say about future rate increases.
Rising interest rates have dampened investments and strengthened the greenback, making dollar-denominated commodities more expensive for holders of other currencies.
In China, the state planner on Monday unveiled measures to spur private investment in some infrastructure sectors, and said it will also strengthen financing support for private projects.
Market participants expect Beijing to implement targeted stimulus measures to support its flagging economy, likely boosting oil demand in the world’s No. 2 consumer.
