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Oil Prices Surge 1.8%: China's Economic Actions and U.S. Travel Demand Fuels the Rise

A recent surge in oil prices reflects strong U.S. travel demand and China's efforts to prop up its economy, with Brent crude and West Texas Intermediate witnessing significant gains.


Oil Prices Rebound After Three-Day Fall

Oil prices rose over 1% on Thursday, marking a significant change after falling for three consecutive days. This increase was fueled by the decline in U.S. gasoline stocks due to strong travel demand and China's central bank actions to support the property market and broader economy.

Performance of Brent and West Texas Intermediate Crude

Brent crude futures climbed by $1.24, or 1.5%, to $84.70 a barrel, while U.S. West Texas Intermediate crude (WTI) went up by $1.48, or 1.8%, to $80.86 a barrel. These gains followed a session where prices fell by over 1.5% due to concerns over China's economy and potential U.S. interest rate hikes.

Strong Travel Demand in the U.S.

Despite usual tapering after the U.S. Independence Day holiday, travel demand remained robust. U.S. gasoline stocks dropped to a more than two-month low, and weekly products supplied, indicative of demand, rose to their highest levels since December.

China's Central Bank Supports Economic Recovery

China's central bank is committed to keeping liquidity reasonably ample and maintaining a "precise and forceful" policy to support economic recovery. This approach is favored by oil traders, as stated by Naeem Aslam at Zaye Capital Markets.

U.S. Interest Rates and Their Impact on Oil Demand

The focus remains on U.S. interest rates a day after the Federal Reserve's meeting in July showed no strong indications about pausing rate hikes. Higher interest rates could slow economic growth by increasing borrowing costs, potentially reducing oil demand.

China's Draw on Crude Oil Inventories

In a bullish move, China drew on crude oil inventories in July for the first time in 33 months. Along with this, data showed U.S. crude oil inventories fell by nearly 6 million barrels last week, supported by strong exports and refining run rates.

Outlook for Oil Prices Amid Macroeconomic Risks

Oil prices seem to stabilize around the $80 level, as various risks to the macroeconomic outlook persist. The interplay between global economic factors and travel demand continues to shape the landscape of oil pricing, experts like OANDA's Moya believe.