New York, March 6 (BNA): Oil prices opened lower Monday after China set a lower-than-expected target for economic growth this year at around 5%, while investors cautiously await testimony from US Federal Reserve Chairman Jerome Powell this week. .
Brent crude futures were trading down 58 cents, or 0.7 percent, at $85.25 a barrel at 0340 GMT. US West Texas Intermediate crude futures also fell 0.7% to $79.12 a barrel, Reuters reports.
“Crude oil remains in a tug of war between optimism about China’s reopening and nervousness from a hawkish Fed hurting the US economy,” said Vandana Hari, founder of oil market analysis Vanda Insights.
China’s closely watched growth forecast, announced on Sunday, fell short of last year’s 5.5% GDP growth target. Last year, GDP grew by only 3%. Political sources told Reuters that a range as high as 6 percent could be set for 2023.
Chinese Premier Li Keqiang said on Sunday that the foundation of stable growth in China needs to be strengthened, insufficient demand remains an obvious problem, and the expectations of private investors and enterprises are unstable.
However, analysts at investment bank UBS raised their forecasts for Chinese GDP growth to 5.4% for 2023 and to 5.2% for 2024 from 4.9% and 4.8%, respectively.
“Economic reopening is going better than we previously expected — the dreaded ‘second wave’ of COVID has not materialized and there have been little signs of supply disruptions,” said Tao Wang, head of China economic research at investment bank UBS, in a note.
The two benchmarks for crude settled, up more than a dollar on Friday, after two sources told Reuters that a report that the United Arab Emirates was considering leaving OPEC was inaccurate.
Harry said the recovery was larger than the pullback in the original news and put crude prices in “overbought territory, so (not surprisingly) prices corrected lower this morning.”
At the same time, oil prices are likely to be affected by interest rate hikes around the world as global central banks tighten policy due to fears of rising inflation. Traders are beginning to take price increases into account around the world, but they are hoping for smaller increases than last year.
US Federal Reserve Chairman Jerome Powell will testify before Congress on Tuesday and Wednesday, where he will likely be grilled on whether a larger hike is needed in the world’s largest oil consumer.
Future increases in US interest rates are also likely to depend on what the February jobs report reveals on Friday, followed by the February inflation report due next week.
Over the weekend, European Central Bank President Christine Lagarde said it was “highly likely” that they would raise interest rates this month to curb inflation.