Despite Strong Data from China, Oil Prices Drop on Economic Worries
On Tuesday, oil prices decreased for the second consecutive day, despite positive economic data from China, due to concerns about a potential rise in U.S. interest rates and uncertainties regarding future economic growth.
Additionally, the resumption of northern oil exports from the Turkish port of Ceyhan, which were previously halted, by the Iraq federal government and Kurdistan Regional Government (KRG) also added to the pressure on crude prices.
As per recent reports, the prices of Brent crude dropped by 28 cents or 0.3% to $84.48 a barrel at 0908 GMT, while U.S. West Texas Intermediate declined by 30 cents or 0.4% to $80.53. Craig Erlam from OANDA stated that the future course of oil prices might rely on the growth of the global economy and its ability to handle recent challenges, particularly in the United States, where tighter credit may severely impact growth throughout the year.
Despite this, earlier, oil had gained support from China’s first-quarter economic growth, which was more robust than anticipated at 4.5%, and record-breaking oil refinery output in March.
Stephen Brennock, an oil broker at PVM, stated that China’s positive economic conditions are providing support for oil prices. However, the possibility of the US increasing interest rates has been affecting market sentiment, as it has been supporting the US dollar.
Traders are anticipating a 25 basis point rate hike by the US Federal Reserve in its May meeting. The US dollar initially strengthened but later decreased on Tuesday. A stronger dollar raises the prices of commodities priced in US dollars for non-US currency holders.
The focus on Tuesday will be the latest report on US inventories. Analysts predict a drop in US crude inventories by approximately 2.5 million barrels, as well as declines in gasoline and distillates. The first report, by the American Petroleum Institute, is scheduled to be released at 2030 GMT, as part of this week’s two reports.
