Oil rises due to Fed hawkishness outweighing Chinese demand concerns. After two consecutive losses, oil prices rallied early on Wednesday as anticipation of aggressive Fed speeches later in the afternoon and anticipated U.S. crude stock decreases offset China demand uncertainties.
By 0307 GMT, Brent futures jumped 35 cents to $76.25, and WTI rose 34 cents to $71.53.
“We expect Fed Chair Powell to deliver a hawkish semi-annual testimony to Congress reflecting the FOMC’s median projection for higher interest rates in coming months and more resilient inflation in the near term,” ANZ Research wrote.
Later on Wednesday, U.S. Federal Reserve Chair Jerome Powell will testify before Congress.
On Tuesday, two Federal Reserve members and one economist nominated to join them on the Fed’s Washington-based board indicated they want to lower inflation to return the U.S. economy to sustainable growth, which might boost oil demand.
A Reuters poll of five analysts estimated that U.S. oil stockpiles declined by around 400,000 barrels in the week to June 16.
After the Juneteenth vacation on Monday, the American Petroleum Institute and Energy Information Administration will issue official U.S. oil inventory figures on Wednesday and Thursday.
The world’s largest oil importer, China, struggled, limiting price advances.
I think prices aren’t rising steadily because China’s data is still uncertain. However, Rystad Energy research director Claudio Galimberti believes the stimulus would revive the economy and boost second-half demand.
“As for the Fed (meeting), that is also uncertain but with latest inflation data coming in at 4%, they have room to be dovish,” Galimberti said.
On Tuesday, China dropped its five-year loan prime rates (LPR) for the first time in 10 months to promote growth.
Recent economic figures showed China’s retail and industry sectors failed to maintain momentum.
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