Oil prices rose on Tuesday, helped by China’s attempt to revive its economy and a tropical storm in the Gulf of Mexico. The price of a barrel of North Sea Brent for November delivery closed up 1.72%, at $75.17. The price of a barrel of US West Texas Intermediate (WTI) of the same maturity gained 1.69%, at $71.56.
“Today’s story is China”explained Phil Flynn of Price Futures Group, “Because every time people talk about a weakened market, they talk about China.” China’s central bank (PBoC) on Tuesday outlined a series of measures to boost the world’s second-largest economy, which is still recovering from the coronavirus pandemic. The bank will cut a key interest rate, get commercial banks to cut the cost of mortgages and create a financial market stabilization fund. “Many people say that China has finally become more radical”notes Phil Flynn, after making marginal adjustments that did not have the desired effect.
Positive feeling
Beijing’s move extends the positive sentiment that emerged from the U.S. central bank’s (Fed) sharp cut in its key interest rate last week, according to Daniel Ghali of TD Securities. “We are aware that monetary policy decisions take time to have an effect on demand for raw materials, (…) but as it stands, this package of measures supports the demand trend”the analyst continued in a note.
For Phil Flynn, black gold was also encouraged by the arrival of tropical storm Helen in the Gulf of Mexico. According to the Bureau of Environmental Safety and Protection (BSEE), preventive platform shutdowns had reduced American offshore crude production capacity by 16% on Tuesday. Helen is nevertheless heading more towards Florida and should spare oil and gas installations in Texas and Louisiana. With the passage of Hurricane Francine in mid-September, “production had been reduced for a while”Phil Flynn recalled, “but this time it should be restored quickly”.
