Oil fell slightly on Tuesday on expectations that further rate hikes in the United States, the world’s largest oil user, would slow economic growth and limit fuel demand.
Brent futures for March delivery fell 43 cents, or 0.5%, by 0522 GMT to $79.22. West Texas Intermediate crude fell 36 cents, or 0.5%, to $74.27 per barrel.
Both indicators rose 1% on Monday after China, the world’s largest oil importer and second-largest consumer, opened its borders over the weekend for the first time in three years.
It is said that the US Federal Reserve’s policy rate, which is currently 4.25% to 4.5%, should rise to the range of 5% to 5.25% to contain higher inflation rates.
The expectation is more hawkish than the 4.75%-5% range that the markets are currently pricing in. The tone of Fed chair Jerome Powell’s speech on Tuesday may confirm the expectation.
Fed policymakers can set the stage for future meetings in new inflation data, due later this week, with a mere quarter-point increase rather than the larger jumps they’ve used for most of 2022.
According to sources, China has also issued the second batch of 2023 raw import quotas, increasing this year’s total by 20% compared to the same period last year.
However, analysts warned that the recovery in demand in China may have a limited role in raising oil prices that are under global economic downward pressure.
The social vitality of China’s major cities is recovering rapidly, but oil prices will likely remain in the low range, given that the recovery in consumption is still not at the expected stage.
According to a preliminary survey, US crude inventories are likely down by 2.4 million barrels and distillate stocks are also down slightly.
Industry group American Petroleum Institute (API) will release data on US crude oil inventories at 2030 GMT. The Energy Information Administration (EIA), the statistical arm of the US Department of Energy, will release its own figures at 1430 GMT on Wednesday.
