According to Reuters, oil prices were slightly down on Tuesday due to fears that future interest rate increases in the United States, the world’s largest oil consumer, would stifle economic development and reduce fuel consumption.
By 0719 GMT, March Brent futures were down 33 cents to $79.32 per barrel, or 0.4%. The price of American West Texas Intermediate oil fell by 29 cents, or 0.4%, to $74.34 a barrel. After China, the world’s largest importer of oil and second-largest user, opened its borders over the weekend for the first time in three years, both benchmarks increased by 1% on Monday.
Two United States Federal Reserve officials this week expected the Fed policy rate – now at 4.25 percent to 4.5 percent – to need to rise to a 5 percent to 5.25 percent range to bring higher inflation rates under control.
“(The expectation) is more hawkish than what markets are pricing at the moment (4.75-5 percent range),” said Yeap Jun Rong, Market Analyst at IG in a note, adding that the upcoming speech from Fed chair Jerome Powell later on Tuesday could mirror the hawkish tone with some pushback as well.
At their forthcoming meeting, Fed members will determine whether to lower the pace of interest rate rises to only a quarter-point increase rather than the greater leaps they utilized for much of 2022. New inflation statistics due out later this week will be helpful in this decision.
According to sources and documents examined by Reuters on Monday, China also released a second batch of 2023 crude import quotas, increasing the total for this year by 20% compared to the same period last year. Analysts cautioned that, given the downward pressure on the global economy, China’s renewed demand for oil may only have a limited impact on its price.
“The social vitality of major Chinese cities is rapidly recovering, and the restart of China’s demand is worth looking forward to. However, considering that the recovery of consumption is still at the expected stage, the oil price will most likely remain low and range-bound,” said analysts from Haitong Futures.
Separately, U.S. crude oil stockpiles likely fell 2.4 million barrels, with distillate inventories also seen slightly down, a preliminary Reuters poll showed on Monday.
