Oil slips as recession fears loom over economic data

Oil prices moved lower on Monday as investors deliberated over a likely May interest rate hike by the U.S. Federal Reserve, which might hamper economic recovery hopes, despite Chinese GDP data was expected to augur well for demand growth.

Brent crude futures were down 55 cents or 0.6% at $85.76 a barrel at 1240 GMT, while U.S. West Texas Intermediate crude was at $81.92 a barrel, down 60 cents or 0.6%.

Both contracts earned their fourth weekly rise in a row last week, the longest such sequence since mid-2022.

“Crude futures were relatively rangebound as a fresh week began … with the OPEC/non-OPEC output cuts announced a fortnight ago fully baked in”, Vandana Hari, founder of oil market intelligence service Vanda Insights, said.

Earnings from U.S. firms could also provide hints for the Fed’s policy direction and the dollar’s future.

The greenback has been gaining alongside interest rate hikes, making dollar-denominated oil more expensive for holders of other currencies.

Traders are anticipating the Fed will boost its lending rate in May by another quarter of a percentage point and have pushed off to late this year expectations of a rate decrease, as often occurs in a slowdown. [MKTS/GLOB]

The release of China’s first-quarter gross domestic product (GDP) figures at 0200 GMT on Tuesday is meanwhile likely to be beneficial for commodity prices, with the International Energy Agency (IEA) estimating it will account for majority of 2023 demand increase.

However, the IEA also warned in its monthly report that output cuts announced by OPEC+ producers risked exacerbating an oil supply deficit expected in the second half of this year and could hurt consumers and a global economic recovery.

Further tightening supplies, oil exports from northern Iraq to the Turkish port of Ceyhan remain at a standstill almost three weeks after an arbitration case ruled Ankara owed Baghdad compensation for unauthorised exports.