Oil prices went up Tuesday after falling in the previous session as worries about further interest rate hikes in the US eclipsed optimism about rising demand in China, the world’s second-largest crude consumer.
Brent crude inched up 0.1% to $82.50 a barrel at 9:47 am GST Tuesday, while US West Texas Intermediate (WTI) crude edged up 0.2% to $75.83 per barrel around the same time.
Oil prices fell in the previous session on concerns of further US Federal Reserve increases following stronger-than-expected new orders for key US-manufactured capital goods in January.
The large gains in core capital goods orders reported by the Commerce Department Monday joined the recent solid consumer spending and robust labor market data indicating an upbeat picture of the US economy.
Earlier this month, the Federal Reserve raised its target interest rate, but at a slower pace, and warned of more increases in the coming months to cool inflation, which remains elevated. Fed Chair Jerome Powell said at a press briefing that despite the economy’s disinflationary process already starting, it is still premature to declare victory against inflation.
Inflation for services in the US also remained “stubbornly high,” a Reuters report said, citing US Fed Governor Philip Jefferson.
The rate hikes forecast in recent days dimmed the optimism surrounding demand recovery in China following the full easing of its COVID-19 restrictions last month.
Last week, Morgan Stanley raised its global demand forecast for oil by 36% for 2023, an increase of 1.9 million barrels per day, citing the rebound in China's economy and increasing demand for air travel as the two main reasons for the better demand.
However, RBC Capital Markets said earlier this month that there are uncertainties regarding the pace of China’s reopening, adding that the country “needs to pull harder for the physical messiness to clean up,” according to a Bloomberg report.
Meanwhile, Goldman Sachs said last week that China’s reopening from the zero-COVID-19 restrictions would accelerate the country’s economic recovery and boost global economic growth.
