Brent flat amid signs of demand recovery in China and rate hike fears in US

The front-month ICE Brent contract has lost $0.06/bbl on the day from Friday, to trade at $93.99/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Brent futures gained support after market intelligence provider JLC reported that China’s crude refining run rate hit a record high in August amid strong demand.

China processed 64.69 million mt of crude in August with a daily throughput of 15.23 million b/d, an increase of 19.6% from August 2022, JLC reported citing data released by China’s National Bureau of Statistics (NBS).

Energy analysts expect that signs of improvement in China’s economy will help boost demand growth in the country. “The short-term crude demand outlook gets a boost from improving Chinese economic data,” said OANDA’s senior market analyst Ed Moya.

Downward pressure:

The upcoming decision by the US Federal Reserve (Fed) on interest rate hike is a “significant focal point” for oil investors, said SPI Asset Management’s managing partner Stephen Innes. US Fed officials are scheduled to meet at the Federal Open Market Committee (FOMC) meeting on 19-20 September.

The recent surge in oil prices can add further inflationary pressure and prompt the Fed to continue raising interest rates, Innes said.

“The Fed may continue its efforts to combat inflation and gradually normalize monetary policy as it monitors economic conditions and inflationary pressures,” added Innes.

Higher interest rates discourage borrowing and spending, which leads to a decline in economic activity and fuel demand.

By Aparupa Mazumder

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