Investing.com -- Oil prices rose Monday, helped by another rate cut from China, the world’s largest crude importer, as well as the prospect of tighter supplies.
By 09:30 ET (13:30 GMT), the U.S. crude futures traded 0.8% higher at $81.27 a barrel, while the Brent contract climbed 0.8% to $85.46.
PBOC cuts rates again
The People’s Bank of China cut its one-year loan prime rate by 10 basis points to 3.45% earlier Monday.
While this was less than had been expected, and the five-year rate which is used to determine mortgage costs was left unchanged, this still suggests that Beijing is determined to support the second largest economy in the world as it struggles with a slowing post-COVID economic recovery.
The PBOC unexpectedly cut short and medium-term lending rates last week.
Supplies continue to tighten
Worries over the strength of the Chinese economic recovery contributed to the losses last week when benchmark oil prices snapped a 7-week winning streak last week to post a weekly loss of 2%.
That said, prices are still over 5% higher in the last month following the announcement of deep output cuts by Saudi Arabia and Russia, the two largest producers in the OPEC+ grouping.
These producers said that recent cuts will extend until at least the end of September -- a scenario that is expected to limit crude supplies by nearly 70 million barrels over 45 days.
Adding to this, the latest rig data from Baker Hughes shows that the number of active oil rigs in the U.S. fell by 5 over the week to 520 - the lowest level since March last year.
“The U.S. has lost 107 oil rigs since early December and it is not too surprising that this reduced drilling activity means that oil production growth forecasts for later this year and through 2024 are looking relatively modest,” said analysts at ING, in a note.
Net long Brent positions rise
These expectations of tightening supplies no doubt helped speculators decide to increase their net long positions in the ICE (NYSE:ICE) Brent contract by 19,748 lots to 230,735 lots, despite oil prices edging lower over the reporting period.
“The move was driven by fresh longs, suggesting that some speculators took advantage of more recent price weakness to enter the market from the long side,” ING added.
(Ambar Warrick contributed to this article.)