Global oil prices saw an uptick in early trading today, bolstered by constrictions in U.S. supply. Investors are now closely eyeing China’s upcoming factory activity report, as concerns linger over the recent sluggish economic growth in the world’s second-largest economy.
Brent crude futures, with the October contract set to expire on Thursday, climbed 0.16% to $86 per barrel, while the more active November contract rose 0.12% to $85.34 at 0039 GMT. Meanwhile, U.S. West Texas Intermediate crude futures recorded a modest 0.13% gain, reaching $81.74.
The current week has witnessed a surge in prices, supported by U.S. government data revealing tighter-than-anticipated crude supplies. Additionally, concerns over crude oil supply disruptions emerged after a military coup in Gabon, an OPEC member.
Market analysts anticipate that Saudi Arabia will continue its voluntary oil cut of 1 million barrels per day for a third consecutive month into October. This move would complement the existing cuts enforced by OPEC+—a coalition comprising the Organization of the Petroleum Exporting Countries and allies led by Russia.
Amidst these developments, the U.S. economy showed signs of slowdown, as the gross domestic product increase for the last quarter was revised down to 2.1%, compared to the 2.4% pace reported the previous month. Furthermore, recent data indicated a significant deceleration in private payroll growth during August.
In light of these economic concerns, the former president of the Boston Fed suggested that the Federal Reserve could halt its cycle of interest rate hikes if the labor market and economic growth continue to diminish gradually. The prospect of weaker U.S. economic data appeared to positively influence market sentiment, as it lowered expectations of another rate hike. Such hikes are known to reduce demand and exert downward pressure on oil prices.
As the economic landscape remains uncertain, China’s factory activity is expected to have contracted for the fifth consecutive month in August. According to a Reuters poll, the official purchasing managers’ index (PMI) is projected to have slightly improved to 49.4, up from July’s 49.3 reading. However, this would mark the fifth consecutive month below the crucial 50.0 level, signifying the boundary between economic expansion and contraction.
Investors await the PMI figures with bated breath, as they anticipate insights into the recovery prospects of China’s economy and the strategies that officials may employ to stimulate growth.
