Oil prices increased modestly in early trade on Wednesday as investors await Federal Reserve Chairman Jerome Powell’s much-anticipated congressional testimony later in the day, overshadowing demand concerns caused by China’s interest rate decrease.
Powell’s speech is expected to provide signals about the Fed’s next moves.
International benchmark Brent crude traded at $76.02 per barrel at 09.58 a.m. local time (0658 GMT), a 0.16% gain from the closing price of $75.90 a barrel in the previous trading session on Friday.
The American benchmark West Texas Intermediate (WTI) traded at the same time at $71.30 per barrel, up 0.15% from the previous session’s close of $71.19 per barrel.
Last week, the Fed left its federal funds rate unchanged for the first time since January 2022, after hiking rates by 500 basis points in 10 meetings from March 2022 up to this May.
In his post-meeting news conference, Powell voiced the expectations of committee participants ‘to raise interest rates somewhat further by the end of the year’ to tame rising inflation.
Investors are also awaiting crude oil inventory data to be released by the American Petroleum Institute (API) later on Wednesday and the Energy Information Administration on Thursday. An inventory increase implies a lowering of crude demand in the US, while declining stocks are indicative of strong demand.
As the world’s second-biggest oil user and largest oil importer, any economic changes in China are always relevant for oil prices, especially as the country has only recently recovered from the two-year-long COVID-19 pandemic that damaged its industry and economy.
Casting doubts on its oil demand, the People’s Bank of China cut its medium-term lending rate—the one-year loan prime rate (LPR)—for the first time in 10 months as the post-COVID recovery lost momentum. The rate was cut for the first time since August 2022 and lowered by 10 basis points to 2.65%.
Limiting demand concerns, China’s oil refinery output reached a new high in May, up 15.4% over the previous month.
