Oil prices were little changed on Tuesday as the market assessed the balance between supply tensions and China’s economic recovery. Brent crude futures for August delivery, which expire later this week, rose 7 cents to $86.06 a barrel. The more actively traded September contract was up 8 cents at $85.23. Meanwhile, U.S. crude futures rose 11 cents to $81.74 a barrel. The benchmarks gained 3% last week, marking two straight weeks of gains.
However, concerns about China’s economic recovery have mounted. Chinese retailers are facing challenges in the wake of a disappointing online shopping event in the middle of the year. Consumer spending in China, the world’s largest oil importer, has been tepid due to concerns about personal finances amid a slumping housing market, stagnant wage growth and high youth unemployment. These factors threaten China’s goal of achieving economic growth of around 5% this year.
In the Middle East, tensions have been rising in the Middle East, with Israeli airstrikes in Gaza killing at least 11 Palestinians on Monday. Israeli tanks have also advanced into Rafah and pushed back into previously controlled areas in the north. Despite international efforts, including US support, to negotiate a ceasefire, no agreement has been reached. The conflict continues, with Israel aiming to eliminate Hamas, while Hamas insists on reaching a solution that will end the war.
In eastern Europe, Ukrainian President Volodymyr Zelensky announced that more than 30 Russian oil processing and storage facilities had been targeted, without specifying a timeline. The latest strikes on June 21 hit four refineries, including Ilskiy, a major fuel producer in southern Russia. In addition, the European Union agreed a new set of sanctions against Russia on Monday, including a ban on the transshipment of Russian liquefied natural gas in the EU for shipment to third countries.
In the United States, San Francisco Federal Reserve President Mary Daly said on Monday that the Federal Reserve should not consider cutting interest rates until there is confidence that inflation is moving toward its 2% target. Delaying a rate cut could keep borrowing costs high, which could dampen economic activity and weigh on demand for oil.
Finally, U.S. crude oil inventories were expected to fall by 3 million barrels in the week ended June 21, according to a preliminary poll. While gasoline stocks were expected to fall, distillate inventories were likely to have increased last week.
