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Recent rate increases by central banks, headed by the BoE on Thursday, fuel concerns about a decline in oil demand. Despite recent decreases in OPEC+ output and an unexpected drop in US petroleum stocks, WTI declines. In light of worries about an economic downturn, traders are turning their attention to China’s impending manufacturing activity data.
The price of WTI crude oil, a benchmark, fell more than 3% after several central banks, including the Bank of England (BoE), increased interest rates. Higher interest rates weigh on economic development and could indicate lower demand for oil. WTI reached a day high of $72.61 before trading at the time of writing at $69.28 per barrel.
As central banks tighten and China’s economy slows, crude oil prices drop by more than 3%. As US markets trade mixed, investors’ sentiment is still precarious but has turned somewhat in a favourable direction. Wednesday’s gains were lost on WTI. Despite the anticipated reductions in OPEC+ petroleum supply, there are growing fears about an economic slowdown in China, as seen by the People’s Bank of China’s most recent rate cuts.
In addition, the BoE increased interest rates by 50 basis points, which dimmed the UK’s economic outlook because higher rates could hamper economic development. In his closing remarks to the US Congress, Fed Chair Jerome Powell reiterated that two interest rate rises are still on the table while retaining his neutral posture.
However, traders appear to be ignoring the most recent Fed dot plots, as they only anticipate one more increase of 25 bps in July, with probabilities of 76.9%. According to a US Energy Information Administration (EIA) data, oil stocks decreased by 3.8 million barrels last week to reach 463.3 million, falling short of analysts’ predictions for an increase of 300,000 barrels.
The release of China’s industrial activity data the following week, which may provide some insight into the health of the Chinese economy, has altered the focus of WTI traders.
