Oil ticks higher after China moves to support flagging economy

Oil prices ticked higher on Monday, along with equity markets, after China took steps to support its flagging economy, though investors remained worried about the pace of growth as well as further US interest rate hikes that could dampen fuel demand.

Brent crude rose 22 cents, or 0.3 per cent, to $84.70 a barrel by 0049 GMT while US West Texas Intermediate crude was at $80.08 a barrel, up 25 cents, or 0.3 per cent.

Oil benefited from a better tone on the opening, IG market analyst Tony Sycamore said, after China halved stamp duty on stock trading effective Monday in the latest attempt to boost struggling markets.

"Unfortunately, after last week's modest (Chinese central bank interest) rate cut, the announcements above amount to another piecemeal measure that won't alter investor gloom towards China," he added.

China's manufacturing purchasing managers' index (PMI) due later this week will likely reveal more dour economic news around the world's second-biggest economy, Sycamore said. The PMI is likely to remain in contraction territory for a fifth consecutive month, he added.

CMC markets analyst Tina Teng said a soft-landing scenario for the US economy buoyed energy markets on Monday despite the Federal Reserve's ongoing hawkish stance on rate hikes.

Brent and WTI posted a second week of loss on Friday after Fed Chair Jerome Powell said the US central bank may need to raise rates further to cool still-too-high inflation.

However, oil prices remained above $80 a barrel on support from falling oil inventories and supply cuts from the OPEC+ collective of oil producers.

In the United States, energy firms cut the number of active oil rigs for a ninth month in August, Baker Hughes said in its report.

Also, Tropical Storm Idalia has formed in the Caribbean and could strengthen into a hurricane and hit Florida. read more

The hurricane is forecast to miss oil and gas centres in the Gulf and the most likely impact is a day or two of power outages, said IG's Sycamore. That "should see some short term support for the oil price", he said.