Oil down on China outlook, spotlight on possible rate hikes

By Noah Browning

LONDON (Reuters] – Oil prices dropped Monday following China’s lower-than-expected goal for economic growth of around 5% and investors eagerly awaited the testimony by Jerome Powell, Chair U.S. Federal Reserve.

Brent crude oil futures fell 0.8% to $85.12/barrel at 1000 GMT. U.S. West Texas Intermediate Crude Futures (WTI), were down 0.7% or 59c at $79.09.

“Crude remains in a tug-of-war between optimism over Chinese reopening and nervousness over a hawkish Fed hurting the U.S. economy,” Vandana Hari was the founder of Vanda Insights oil market analysis service provider Vanda Insights.

China’s highly watched growth outlook for this year was less than the 5.5% target. Last year’s GDP growth was only 3%. Reuters had been told by policy sources that a maximum of 6% was possible in 2023.

Premier Li Keqiang declared on Sunday that China must consolidate its foundation for sustainable growth. Insufficient demand remains a major problem and private investors’ expectations are unstable.

Two sources informed Reuters Friday that crude oil benchmarks were more than $1 lower after a false report that United Arab Emirates is considering leaving OPEC had been denied by Reuters.

Rate hikes around the globe will have an impact on oil prices as central banks in the global region tighten their policies to combat rising inflation.

The traders are now factoring rate rises into their calculations, although they expect to see smaller increases in the future.

On Tuesday and Wednesday the U.S. Federal Reserve Chair Jerome Powell testified before Congress. He will be asked if larger oil price hikes are necessary in the largest oil-consuming nation.

Future U.S. rates hikes will depend also on Friday’s February payrolls reports, and the next week’s February inflation reports.

Christine Lagarde (European Central Bank President) stated it over the weekend. “very likely” To keep inflation under control, the bank will raise its interest rate this month.

(Additional reporting from Mohi Narayan, New Delhi, Sudarshan Vaadhan in Singapore; editing by Jan Harvey.