Oil reacts to China’s effort to ease economic concerns

Oil prices slightly surged earlier on Thursday after falling for three straight sessions as a result of the sliding US Dollar Index in addition to the significant efforts by China’s central bank to support the country’s real estate sector and overall economy following fears about potential economic slowdown in one of the biggest world economies.

While US West Texas Intermediate crude surged $1.01, or 1.3%, to $80.93 per barrel earlier during the US session, it is trading at only $79.549 per barrel at the time of writing.

Brent oil futures increased 67 cents, or 0.8%, to $84.12 per barrel earlier on the day, during the US session, it is trading at only $83.40 per barrel at the time of writing.

As a result of concerns about China’s fragile economy and the possibility of more hikes in US interest rates, prices dropped more than 1.5% in the previous session.

In order to assist economic recovery against obstacles, China’s central bank stated it would maintain precise and forceful policy and maintain a level of liquidity that was sufficiently ample.

The notion that China won’t put up with economic weakness is welcomed by oil merchants. The day after Federal Reserve meeting minutes left the door open for additional rate hikes and data this week suggested a strong US economy, the dollar index declined from a two-month high.

Higher borrowing costs due to higher interest rates could hamper economic development and lower demand for oil.

A optimistic development was China’s uncommon draw on crude oil inventories in July, its first storage withdrawal in 33 months.

On the strength of strong exports and high refining run rates, data released on Wednesday revealed that US crude oil stockpiles decreased by roughly 6 million barrels last week.

However, according to the data released on Wednesday by the US Energy Information Administration, US petrol supplies fell to their lowest level in more than two months. A proxy for demand, the weekly supply of goods increased to its highest level since December.

The demand for travel has remained obstinately high. After the July 4th holiday (US Independence Day), travel demand usually decreases. According to OANDA analyst Edward Moya, there are still too many risks to the macroeconomic outlook for oil not to find a home around the $80 mark.