U.S. rate hike forecasts and China PMI drop oil prices. Oil prices dipped on Monday due to concerns about rising interest rates from the U.S. Federal Reserve, which may halt growth, reduce fuel demand, and worsen Chinese manufacturing statistics.
Brent futures for July delivery fell 61 cents, or 0.8%, to $79.72 a barrel at 0313 GMT, while WTI oil fell 63 cents to $76.15.
In March, U.S. consumer expenditure remained unchanged as services outpaced goods, but strong underlying inflation pressures might prompt the Federal Reserve to raise interest rates again.
“A hawkish tone from the Fed could put pressure on energy and metals,” ANZ Research wrote in a client note.
This week, the Fed may raise rates by 25 basis points. Since March 2018, the U.S. central bank has lifted its policy rate by 475 basis points from near-zero to 4.75%-5.00%.
First-quarter U.S. economic growth was slower than predicted. Due to increasing borrowing rates, businesses liquidated inventory in expectation of lower demand later this year, offsetting consumer spending growth.
On Sunday, official data revealed that China’s manufacturing purchasing managers’ index (PMI) fell to 49.2 from 51.9 in March, falling below the 50-point barrier that divides monthly activity.
In April, Japan’s third-largest economy’s factory activity declined for the sixth month, although a slower decrease in new orders stabilized the sector.
Mixed economic data keep investors wary. “Brent crude has tracked broader markets in recent sessions, with a slew of economic data creating more uncertainty about the outlook,” ANZ said.
After energy firms reported strong earnings and U.S. data showed declining crude output and rising fuel demand, oil prices rose over 2% on Friday.
February had the lowest U.S. crude output since December at 12.5 million bpd. However, according to the EIA, fuel consumption reached about 20 million bpd, its highest since November.
Last week, EIA data showed U.S. crude oil and gasoline inventories fell more than expected as demand for motor fuel increased ahead of the summer driving season.
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