Oil edges higher on China demand expectations

Oil prices edged higher on Tuesday, with WTI price rising to $69.5 per barrel. If the WTI price declines, it may encounter support near $67 per barrel again, while resistance may be found near $74.6 per barrel.

Oil prices rallied on Tuesday, after being oversold on Monday. Expectations of increased demand from China boosted oil prices on Tuesday. China is the world’s largest importer and oil prices climbed on Tuesday after China's central bank lowered short-term borrowing costs to assist the country’s economic recovery.

Reports that Goldman Sachs cut oil price forecast put pressure on oil prices on Monday. Goldman Sachs has lowered its forecast for oil prices by nearly 10%, citing weak demand in China and increased supply by countries such as Russia, Iran, and Venezuela. 

The U.S. Federal Reserve is holding its next policy meeting on Wednesday and its outcome is expected to affect oil prices. Markets are pricing in an 80% chance that the Fed will not raise interest rates at its meeting this week. The US Central Bank has signaled a pause in its hawkish policy, providing support for oil prices. 

Global economic concerns have been weighing oil prices down, raising concerns about further oil production cuts. OPEC+ members, however, opted to keep production cuts unchanged for the remainder of 2023. This includes the 2 million barrels-per-day cut announced last October. Saudi Arabia, on the other hand, announced substantial voluntary cuts in its oil output. Saudi Arabia will reduce production by an additional one million barrels per day, starting in July for a month that can be extended. This will reduce Saudi Arabian production to 9 million barrels per day. The Kingdom will also extend a production cut of 500,000 barrels per day, which was announced in April, through 2024. Supply concerns drove oil prices up after the announcement.

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Written by:
Myrsini Giannouli

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