Crude oil futures stabilized on Monday after briefly turning negative following gains of more than $1 earlier in the session, as markets weighed supply tightness against expectations of slow demand growth, particularly from China.
Brent crude was up 14 cents to $84.94 a barrel, while U.S. West Texas Intermediate crude was up 18 cents at $81.43 a barrel at 9:43 a.m. CDT (1443 GMT).
Market sentiment still anticipated prices would move upward given the tight supplies and threats from storms and hurricanes, said Dennis Kissler, vice president of trading at BOK Financial.
"The wild card going forward is when will China’s weakening economy begin to ease crude demand," Kissler said.
Both front-month benchmark prices snapped a seven-week winning streak last week with a weekly loss of 2% on concern that China's sluggish economic growth will curb oil demand, while the possibility of further increases to U.S. interest rate also overshadows the demand outlook.
China's central bank trimmed its one-year lending rate by 10 basis points and left its five-year rate unmoved. That was a surprise to analysts who had expected cuts of 15 basis points to both as recovery in the world's second largest economy has been slowed by a worsening property slump, weak spending and tumbling credit growth.
Top exporter Saudi Arabia's July shipments to China fell 31% from June while Russia, with its discounted crude, remained the Asian giant's largest supplier, Chinese customs data showed.
China's crude oil imports from Saudi Arabia are expected to remain depressed through the third quarter, analysts said.
China is drawing on record inventories amassed earlier this year as refiners scale back purchases after prices were driven above $80 a barrel by supply cuts implemented by the OPEC+ group comprising the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia.
"We still see a tight oil balance for the remainder of the year, which suggests that prices still have some room to run higher," said Warren Patterson, ING's head of commodities research, adding that the dollar was also providing support.
A weaker dollar makes oil purchases less expensive for holders of other currencies, potentially boosting demand.
(Reuters - Reporting by Erwin Seba, Natalie Grover, Paul Carsten, Florence Tan and Mohi Narayan; Editing by David Goodman, Mark Potter and Barbara Lewis)