According to Reuters, concerns that future interest rate rises in the United States, the world’s top oil user, will impede economic growth and lower gasoline consumption, led to a modest decline in oil prices on Tuesday.
March Brent futures were down 33 cents, or 0.4%, at $79.32 per barrel as of 07:19 GMT. American West Texas Intermediate crude oil dropped in price by 29 cents, or 0.4%, to $74.34 a barrel.
Both benchmarks rose 1% on Monday as a result of China, the world’s largest oil importer and second-largest consumer, opening its borders over the weekend for the first time in three years.
Two United States Federal Reserve officials this week expected the Fed policy rate – now at 4.25 per cent to 4.5 per cent – to need to rise to a 5 per cent to 5.25 per cent range to bring higher inflation rates under control.
“(The expectation) is more hawkish than what markets are pricing at the moment (4.75-5 per cent 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.
Fed policymakers will decide whether to slow the pace of interest rate increases to only a quarter-point increase rather than the larger leaps they used for much of 2022 at their upcoming meeting. This choice will be aided by fresh inflation data that will be released later this week.
China also published a second batch of 2023 crude import limits, raising the total for this year by 20% in comparison to the same period last year, according to sources and documents seen by Reuters on Monday.
Analysts expressed concern that China’s increased demand for oil may have a limited influence on its price given the downward strain on the global economy.
“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.
