Investing.com -- Oil prices rose slightly in Asian trade on Tuesday, sticking to three-month highs as signs of tighter supply and expectations of more Chinese stimulus helped offset uncertainty over an upcoming Federal Reserve meeting.
Crude prices saw a strong start to the week, rising over 2% after top Chinese officials pledged to spruce up economic growth in the world’s largest oil importer.
This came amid tighter global crude supplies, as the effects of recent production cuts by the Organization of Petroleum Exporting Countries and Russia began to be felt.
Brent oil futures rose 0.1% to $82.70 a barrel, while West Texas Intermediate crude futures rose 0.4% to $79.03 a barrel by 21:12 ET (01:12 GMT).
China stimulus in focus as economic recovery cools
China’s Politburo - the ruling Communist Party’s top decision-making body - vowed to roll out more supportive measures for the economy in the coming months, after recent data showed that growth slowed sharply in the second quarter.
The move pushed up hopes that oil consumption in the world’s largest importer will improve this year. While China has imported nearly record amounts of crude so far in 2023, fuel demand in the country has struggled to reach pre-COVID levels.
This trend had also largely undermined bets that a recovery in China will drive global oil demand to record highs in 2023.
But more stimulus measures could still result in such a scenario, especially as the government promotes private investment and spending in the country.
U.S. inventory data on tap
Oil markets were also focused on U.S. inventory data, which is due later on Tuesday and Wednesday. Inventories are expected to have fallen by over 2 million barrels in the week to July 21, indicating some steady demand.
But indicators of U.S. fuel consumption will be closely watched, amid some concerns over sluggish demand in the world’s largest oil consumer. Extreme weather conditions and high inflation have somewhat weighed on fuel demand in recent weeks.
Fed rate hike, outlook awaited
Gains in oil markets were limited on Tuesday as markets awaited a Fed decision on interest rates. The central bank is widely expected to hike rates by 25 basis points at the conclusion of a two-day meeting this Wednesday.
While the hike appears to be largely priced in by markets, focus is squarely on whether the bank will signal more raises or an end to its nearly 16-month-long rate hike cycle.
Any indications of higher rates bode poorly for the world’s largest economy, and could potentially stymie oil demand as economic activity slows.
Data released this week already pointed to worsening business activity in the world’s largest economies.