Oil steadies as supply concerns counter macroeconomic jitters

Oil prices were little changed on Tuesday as investors weighed supply concerns from a hurricane hurtling towards the U.S. Gulf Coast against the enduring possibility of demand being dented by another increase to U.S. interest rates.

Brent crude edged up by 3 cents to $84.45 a barrel by 1332 GMT while U.S. West Texas Intermediate crude dipped 4 cents to $80.07.

Hurricane Idalia strengthened on Tuesday as it headed towards Florida’s Gulf Coast after skirting past Cuba.

It is likely to cause power outages and could hit crude production. U.S. oil producer Chevron evacuated staff from three U.S. Gulf of Mexico oil production platforms ahead of the hurricane.

Supply concerns have also been heightened by a fire at a Marathon Petroleum refinery last week after a chemical leak ignited two giant storage tanks filled with naphtha.

On Monday the company said it planned to restart units at the 596,000 barrel per day (bpd) refinery, the third-largest in the United States.
“Such incidents will remain catalysts in upward movement as the oil community is currently very sensitive to interruptions to any refinery, anywhere in the world,” said John Evans of oil broker PVM. Meanwhile, Norwegian maintenance outages and threats of labour action at Chevron’s two major liquefied natural gas (LNG) production facilities in Australia – accounting for more than 5% of global LNG capacity – have lifted LNG prices and could bolster oil demand.

However, oil demand worries fester in the world’s two biggest economies – the U.S. and China.

Federal Reserve Chair Jerome Powell on Friday said the U.S. central bank may need to raise interest rates further to cool stubborn inflation.

China’s post-pandemic economic recovery has sputtered in the face of a worsening property sector slump, weak consumer spending and tumbling credit growth, prompting Beijing to cut policy rates.

Eyes are on economic data expected from major economies this week for clues on interest rates this year and next.

“It may be difficult for oil prices to maintain the strong bull trend (seen) in July … The U.S. and European economies will face downward pressure in the fourth quarter until interest rates peak,” said CMC Markets analyst Leon Li.

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