Oil steadied after a three-day drop spurred by concerns over the Chinese economy and the possibility of even tighter US monetary policy.
West Texas Intermediate was little changed above $79 a barrel after shedding more than 4% this week. Worries over top importer China’s post-pandemic recovery have taken center stage, despite vows of support from policymakers. That’s hurt appetite for risk assets including commodities.
In the US, Federal Reserve officials remained concerned that inflation would fail to recede and that further interest rate rises could be needed, according to minutes from the central bank’s July meeting. Higher borrowing costs may hurt energy demand, while supporting gains in the US dollar.
With prices slipping away from multi-month highs in recent days, Citigroup Inc. urged investors to sell oil into the winter, given the likelihood of soft demand and robust supply. Prior to that they had rallied as OPEC+ supply cuts and a robust physical market buoy prices.
“The oil market has been unable to escape broader market concerns following a raft of weaker-than-expected Chinese macro data this week,” said Warren Patterson, head of commodities strategy at ING Groep NV. “However, we remain constructive on oil, given the expectation that fundamentals will continue to tighten due to ongoing supply cuts from OPEC+.”
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