TOKYO, Japan (Reuters) – Oil prices fluctuated on Tuesday as the world’s second largest economy prepared to make a decision about lending benchmarks. It is widely expected that China will cut rates in order to boost a slowing economic recovery.
Brent crude rose 3 cents to $76.12 per barrel at 0041 GMT. U.S. West Texas Intermediate crude (WTI), which is the benchmark for U.S. crude oil, was unchanged at $71.29 a barrel and there was no settlement Monday due to an American public holiday.
The WTI crude oil contract for July 20 is down 58 cents, to $71.35 a barrel.
A Reuters survey revealed that China will likely cut its key lending benchmarks for the first time in 10 months on Tuesday. Recent economic data had shown the factory and retail sectors struggling to maintain the momentum they enjoyed earlier in the year.
Last week, the Chinese government discussed measures to boost growth in the Chinese economy. Several major banks cut their economic growth predictions for 2023 amid concerns that a post COVID recovery may be faltering.
In a note to clients published on Tuesday, ANZ Research stated that "skepticism about Chinese stimulus measures weighed heavily on sentiment." The markets also lacked direction, with the U.S. closed. Liquidity fell.
Two policymakers from the European Central Bank called for further rate increases on Monday amid rising inflation risks. The markets will also be watching the testimony of U.S. Federal Reserve chair Jerome Powell, due later this week, for clues on future interest rates.
Rates that are higher can reduce spending and cause oil demand to drop.
Iran's crude oil exports and production have reached new heights in 2023, despite U.S. sanction.
Russia will increase its seaborne gasoil and diesel exports in this month. This is more than the Organization of Petroleum Exporting Countries' (OPEC) cuts and those of its allies including Moscow.
"Supply is rebounding and surprising to the upside, from a variety of sources, including U.S. Nigeria, Iran and Venezuela are among the sources of supply that have rebounded.
The bank lowered its forecast for the average price of Brent this year to $81 a barrel from an earlier forecast of $90 per barrel.
Analysts said that even if the OPEC+ reductions are extended until 2024, they will not be enough to balance global supply and demand.