Crude Oil Falls as Possible Rate Hike Shadows Chinese Data
By Adedapo Adesanya
Crude oil fell for a second day on Tuesday as upbeat Chinese economic data failed to deflect the focus from a possible increase in interest rates in the United States.
Brent crude fell by 18 cents or 0.2 per cent trade to $84.58 a barrel, while the US West Texas Intermediate (WTI) lost 2 cents to sell for $80.81 per barrel.
Oil had found support from figures showing that China’s economy grew by a faster-than-expected 4.5 per cent in the first quarter and that oil refinery throughput rose to record levels in March.
On a quarter-by-quarter basis, GDP grew 2.2 per cent in January-March, data released by the country’s National Bureau of Statistics showed, compared with expectations for a 2.2 per cent increase and a revised 0.6 per cent rise in the previous quarter.
This is as policymakers move to bolster growth following the end of strict COVID-19 curbs in December.
However, the prospect of another increase in US interest rates, which has been supporting the US Dollar, remained a drag on sentiment.
Traders expect the US Federal Reserve to raise rates by 25 basis points at its May meeting.
The Dollar eased on Tuesday after earlier gains. A stronger greenback makes commodities priced in the US currency, like oil, more expensive for buyers holding other currencies.
Crude was also pressured by the Iraq federal government and Kurdistan Regional Government (KRG) to take a step towards a resumption of northern oil exports from the Turkish port of Ceyhan after they were halted last month.
Turkey halted Iraq’s 450,000 barrels per day of northern exports on March 25 after an arbitration ruling by the International Chamber of Commerce (ICC), which ordered Turkey to pay Iraq damages of $1.5 billion for unauthorised exports by the KRG between 2014 and 2018.
Now, both governments have ironed out technical issues essential to resuming northern oil exports from the Turkish port of Ceyhan to international markets.
Coming into focus will be the latest snapshot of US inventories. Analysts expect US crude inventories to fall by about 2.5 million barrels.
Also, the Group of Seven (G7) nations will maintain their price cap on Russian crude oil at $60 per barrel.
The decision comes despite rising oil prices that have narrowed the discount between Brent and Russian crude, bringing it closer to the cap, and also despite calls from some EU members and Ukraine for a lower cap.