Oil price declines to $79.32 as US rate increases

Oil prices were marginally down on Tuesday, according to Reuters, as a result of worries that upcoming interest rate increases in the United States, the world’s largest oil consumer, will impede economic growth and lower gasoline consumption.

March Brent futures were down 33 cents, or 0.4%, at $79.32 per barrel as of 07:19 GMT. American West Texas Intermediate crude oil dropped in price by 29 cents, or 0.4%, to $74.34 a barrel. Both benchmarks jumped by 1% on Monday as a result of China, the world’s largest importer of oil and second-largest consumer, opening its borders over the weekend for the first time in three years.

This week, two United States Federal Reserve officials predicted that the Fed policy rate, which is currently in the range of 4.25 percent to 4.5 percent, would need to increase to the range of 5 percent to 5.25 percent in order to contain rising inflation rates.

“(The expectation) is more hawkish than what markets are pricing at the moment (4.75-5 percent range),” said Yeap Jun Rong, Market Analyst at IG in a note, adding that the upcoming speech from Fed chair Jerome Powell later on Tuesday could mirror the hawkish tone with some pushback as well.

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China also published a second batch of 2023 crude import limits, raising the total for this year by 20% in comparison to the same period last year, according to sources and documents analyzed by Reuters on Monday. Analysts expressed concern that China’s increased demand for oil may have a limited influence on its price given the downward strain on the global economy.

“The social vitality of major Chinese cities is rapidly recovering, and the restart of China’s demand is worth looking forward to. However, considering that the recovery of consumption is still at the expected stage, the oil price will most likely remain low and range-bound,” said analysts from Haitong Futures.

Separately, U.S. crude oil stockpiles likely fell 2.4 million barrels, with distillate inventories also seen slightly down, a preliminary Reuters poll showed on Monday.