Oil prices steadied Tuesday, as traders continued to fret about China’s lackluster economic recovery while also awaiting more signals on U.S. monetary policy.

By 09:35 ET (13.35 GMT), U.S. crude futures traded largely flat at $80.12 a barrel, while the Brent contract dropped 0.1% to $84.34.

China’s economic woes weigh
The crude market has weakened this week as investors remained downbeat on China’s economic malaise, hobbling demand from the world’s top crude importer.

Evergrande’s (HK:3333) Chapter 15 bankruptcy filing highlighted China’s economic challenges, particularly in the important property sector, and although the People’s Bank of China has edged interest rates lower, its actions have been widely seen as inadequate.

While China had bought close to record levels of oil through the first half of 2023, its appetite for crude is now expected to slow through the remainder of the year, as fuel demand struggles and economic growth fails to pick up. The country also has high levels of crude stockpiles, which could keep its oil imports limited.

Jackson Hole could provide rates guidance
Also weighing on the market is the possibility of another rate hike in the United States, as central bank officials continue to battle persistent inflation.

All eyes are on the Jackson Hole Symposium later this week, as Federal Reserve Chair Jerome Powell could provide guidance over the future path of interest rates.

Markets fear that higher U.S. rates could potentially hurt oil demand in the world’s largest fuel consumer, especially as the demand-heavy summer season comes to an end.

This notion boosted the dollar in recent weeks, making crude more expensive for international buyers.

API inventories due
That said, prices are still over 3% higher in the last month, close to their strongest levels for 2023, on the prospect of tighter markets this year, especially following steep production cuts by Saudi Arabia and Russia.

Additionally, the U.S. is expected to continue to draw down stocks as the summer driving season draws closer to a close.

The American Petroleum Institute is due to release its estimates of U.S. inventories later Tuesday, and is expected to report another draw following the over 6 million barrels drop last week.

The official release by the Energy Information Administration is scheduled for Wednesday.

{Ambar Warrick contributed to this item.)