© Reuters. A model of oil barrels in front of a rising graph of inventories in this illustration, July 24, 2022. REUTERS/Dado Rovic/Illustration
Written by Trixie Yap and Katya Golubkova
(Reuters) – Oil prices rebounded early Wednesday, recovering after two straight sessions of losses, as expectations of hawkish Fed talk later in the afternoon and a potential stock drawdown were overshadowed by demand worries in China.
Futures rose 35 cents to $76.25 a barrel, and US West Texas Intermediate crude futures rose 34 cents to $71.53 by 0307 GMT.
“We expect Fed Chair Powell to provide a hawkish semi-annual testimony to Congress that reflects the FOMC’s average expectation of higher interest rates in the coming months and more resilient inflation in the near term,” ANZ Research said in the note, referring to the central bank. Federal Open Market Committee.
Congressional testimony delivered by US Federal Reserve Chairman Jerome Powell later on Wednesday is expected to provide clues to future interest rate movements in the world’s largest economy.
Two federal policymakers and an economist nominated to join them at the Federal Reserve Board in Washington said on Tuesday that their focus is on bringing down very high inflation so the US economy can return to sustainable growth, which in turn can boost demand for oil.
A possible decline in US crude stocks also supported prices, as a Reuters poll among five analysts predicted that crude stocks fell by about 400,000 barrels on average in the week ending June 16, on average.
Official U.S. oil inventory data will be released from industry group the American Petroleum Institute later on Wednesday and the Energy Information Administration on Thursday, and both reports were delayed by a day after the June public holiday on Monday. (EIA/S) (API/S)
Concerns about a recovery in demand in China, the world’s largest oil importer, limited price gains as its economy struggled.
“The only reason I think prices are not rising (steadily) yet is because the data from China is still not clear. However, the stimulus is now in and I bet it will be effective in reviving the economy and with it we will,” said Claudio Gallimberti, director of research at Rystad Energy, “delivered strong demand growth in the second half.”
“As for the Fed (meeting), it’s also uncertain, but with the latest inflation data at 4%, they have room to be pessimistic,” Gallimberti added.
In a bid to boost growth, China on Tuesday cut its main loan prime rate (LPR) for the first time in 10 months, with a smaller-than-expected 10 basis point cut in the five-year LPR.
The rate cut came on the heels of recent economic data showing that China’s retail and factory sectors are struggling to maintain the momentum they had earlier this year.