Oil Prices Steady as China Boosts Economy and Storm Threatens Gulf Coast

Oil futures were trading near unchanged early Monday as investors assessed China's latest efforts to bolster its lagging economy, while also monitoring the potential threat posed by Tropical Storm Idalia to Gulf Coast crude and gas output.

Price Action

• West Texas Intermediate crude for October delivery (CL00) was off 2 cents, or less than 0.1%, at $79.81 a barrel on the New York Mercantile Exchange.
• October Brent crude (BRNV23), the global benchmark, was off 19 cents, or 0.2%, at $83.76 a barrel on ICE Futures Europe.
• November Brent (BRN00) was off 17 cents, or 0.2%, at $83.78 a barrel.
• September gasoline (RBU23) fell 1.4% to $2.836 a gallon on Nymex.
• September heating oil (HOU23) declined 1.6% to $3.217 a gallon.
• September natural gas (NGU23) was up 2.5% to $2.603 per million British thermal units.

Market Drivers

Oil futures were lifted in Asian trading hours after China's Finance Ministry and the country's stock market regulator introduced measures aimed at sparking buying interest in stocks. These measures include a halving of a tax on stock trades and limiting sales by big shareholders in companies that haven't handed out enough dividends.

However, gains subsequently faded.

Oil Market Update: Hurricane Threat and OPEC Supply Tightening

Tropical Storm Idalia Forms in the Gulf of Mexico

Tropical Storm Idalia has recently developed in the Gulf of Mexico and is currently projected to potentially make landfall in the southern U.S. as a hurricane, according to the National Hurricane Center.

Oil Prices Experience Weekly Decline

Despite a recent increase in oil prices, there have been consecutive weekly declines following a remarkable seven-week period of growth. The surge in crude prices was largely attributed to Saudi Arabia's decision to implement a production cut of 1 million barrels per day in July, which is set to continue at least until the end of September.

Trading Volumes Show Unusual Decline

Trading volumes for oil have shown an unexpected decline since July, departing from the trend observed over the past two years. This decline can be attributed to concerns about weakening demand, decreasing gasoline inventories, and tighter oil markets resulting from reduced OPEC supply, explains Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

Positive Outlook for Oil Demand

Despite anxieties surrounding Chinese demand, it is anticipated that oil demand will reach new records. Furthermore, OPEC's commitment to restricting supply is expected to drive prices higher. Consequently, there is a structurally positive outlook for oil prices. However, it is essential to mitigate any excessive rally in prices to avoid fueling inflation and rate hike expectations, suggests Ozkardeskaya.