BUSINESS:Crude oil prices fell on Monday as investors waited with caution for the testimony of U.S. Federal Reserve Chair Jerome Powell and China’s lower-than-anticipated target for economic growth this year of around 5%.
Brent crude futures were down 58 cents, or 0.7%, to $85.25 a barrel. According to Reuters, U.S. West Texas Intermediate (WTI) crude futures were also down 0.7 percent, trading at $79.12 per barrel.
According to Vandana Hari, the founder of oil market analysis service Vanda Insights, “prices of Crude remains in a tug-of-war between optimism over Chinese reopening and nervousness over a hawkish Fed hurting the U.S. economy.”
Sunday’s announcement of China’s closely watched growth outlook was lower than the 5.5 percent GDP growth target it set for the previous year. GDP only increased by 3% last year. Reuters was informed by policy sources that a range of up to 6% could be established for 2023.
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On Sunday, Premier Li Keqiang stated that insufficient demand remained a significant issue, the expectations of private investors and businesses were unstable, and the foundation for stable growth in China needed to be consolidated.
However, UBS Investment Bank analysts raised their GDP growth projections for China from 4.9% and 4.8%, respectively, to 5.4% and 5.2%, respectively, for 2023 and 2024.
“The feared’second-wave’ of COVID did not materialize and there was little sign of supply disruptions,” stated Tao Wang, Head of China economic research at UBS Investment Bank, in a note. “Economic re-opening is proceeding better than we had expected earlier.”
After two sources confirmed to Reuters that a report that the United Arab Emirates was considering leaving OPEC was incorrect, both crude benchmarks closed more than $1 higher on Friday.
Putting crude oil prices in “overbought territory, so (it’s) hardly surprising that prices are correcting downwards this morning,” Hari stated that the rebound was greater than the initial decline.
At the same time, as global central banks tighten policy due to concerns about rising inflation, rate hikes are likely to have an effect on oil prices. Traders have begun taking into account global rate hikes, but they anticipate smaller increases than last year.
On Tuesday and Wednesday, the Chairman of the Federal Reserve of the United States, Jerome Powell, will testify before Congress. During his testimony, he will likely be asked if the world’s largest oil-consuming nation requires larger increases.
The European Central Bank President Christine Lagarde stated over the weekend that it was “very likely” they would raise interest rates this month in order to keep inflation under control.
The results of the February payrolls report, which is due on Friday, and the February inflation report, which is due next week, are also likely to influence the future rate hikes in the United States.
