Economy 2 MIN READ

Oil ticks up as markets like Chinese stimulus, falling US inventories

July 21, 2023By Reuters

Oil prices crept up on Friday, buoyed by economic stimulus in slow-recovering China and falling inventories in the US.

Brent futures were up 65 cents to USD 80.29 a barrel by 0817 GMT, while US West Texas Intermediate (WTI) crude climbed 64 cents to USD 76.29 a barrel. Prices closed marginally higher on Thursday.

China’s weak economic figures had kept a lid on prices through the week. The world’s second biggest oil consumer this week posted disappointing growth in second-quarter gross domestic product, increasing the likelihood the economy will miss the government’s 5% annual growth target.

However, sentiment across commodity markets has picked up on hopes the central government would roll out stimulus measures. On Friday, Chinese authorities unveiled plans to help boost sales of automobiles and electronics to shore up its sluggish economy.

“The announcement remains short on detail but notions of China buying more cars gives rise in hope for oil investor bulls,” PVM analyst John Evans said.

Meanwhile, recent US data, including lower-than-expected inflation and moderating job growth, have convinced many investors and analysts the Federal Reserve’s expected July rate hike will be the last of its current tightening cycle.

Supply fundamentals are also adding to the optimism.

In early July, Riyadh said it would extend a voluntary output cut of 1 million barrels per day (bpd) into August, while Moscow said it would cut exports by 500,000 bpd in August.

“That tightness in supply is already showing up in inventories,” analysts from ANZ Bank said.

US crude inventories fell last week, supported by a jump in crude exports as well as higher refinery utilisation, the Energy Information Administration (EIA) said on Wednesday.

(Reporting by Natalie Grover in London; Additional reporting by Arathy Somasekhar in Houston and Andrew Hayley in Beijing; editing by Jamie Freed and Jason Neely)

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