Oil prices increased during Asian trading on Monday, benefiting from a weaker dollar following recent inflation data that increased expectations for a Federal Reserve interest rate cut by September.
However, gains were limited due to worries about China, the largest oil importer, after weekend data revealed ongoing fragility in business activity there.
Brent oil futures for September delivery rose by 0.3% to $85.29 per barrel, while West Texas Intermediate crude futures climbed 0.4% to $81.84 per barrel as of 21:10 ET (01:10 GMT).
Both contracts had seen substantial gains throughout June amid geopolitical tensions in the Middle East and Russia, which heightened concerns about potential supply disruptions and increased crude's risk premium.
A softer dollar, down approximately 0.2% in Asian trade, extended its decline from Friday following a mild easing of inflation in May as indicated by the PCE price index, the Fed's preferred gauge. This led traders to anticipate a 25 basis point rate cut in September, further weighing on the dollar.
A weaker dollar supports oil demand by lowering the commodity's cost for international buyers and bolstering trader risk appetite.
Attention this week is focused on signals from the Fed, with Chair Jerome Powell scheduled to speak on Tuesday and the release of the Fed's June meeting minutes on Wednesday. Key nonfarm payrolls data due on Friday will also influence interest rate expectations, with the labor market's performance critical to Fed decisions.
Despite positive signals on interest rates, U.S. fuel demand remained lackluster according to inventory data released last week, despite increased summer travel.
Concerns over the world's largest oil importer intensified with soft Purchasing Managers Index (PMI) data from China over the weekend, indicating a second consecutive month of contraction in manufacturing activity and a slowdown in non-manufacturing activity. This raised fears that despite recent stimulus efforts, economic growth in China may be weakening, potentially dampening crude demand.
Paraphrasing text from "Investing" all rights reserved by the original author.
