Oil rises as hawkish Fed talk expectations outweigh Chinese demand worries
Shafaq News/ Oil prices rebounded early on Wednesday, recovering after two straight sessions of losses, as expectations of hawkish Fed talk later in the afternoon and possible U.S. crude stock draws in outweighed China demand worries.
Brent futures rose 35 cents to $76.25 a barrel and U.S. West Texas Intermediate (WTI) crude futures climbed 34 cents to $71.53 by 0307 GMT.
"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 said in the note, referring to the central bank's Federal Open Market Committee.
The congressional testimony by U.S. Federal Reserve Chair Jerome Powell later on Wednesday is expected to provide clues on future rate moves in the world's biggest economy.
Two Federal Reserve policymakers and an economist nominated to join them on the Fed's Washington-based board on Tuesday said their focus is on bringing down too-high inflation so that the U.S. economy can get back to sustainable growth, which in turn could bolster oil demand.
A possible drawdown in U.S. crude stocks supported prices as well, with Reuters poll among five analysts estimating that crude stockpiles fell by about 400,000 barrels on average in the week to June 16 on average.
Official U.S. oil inventory data from the American Petroleum Institute industry group will be released later on Wednesday and the Energy Information Administration on Thursday, both reports delayed by a day following the Juneteenth public holiday on Monday.
Concerns about demand recovery in China, the world's top oil importer, limited price gains as its economy struggles.
"The only reason why I think prices are not climbing (steadily) yet is because the data from China is still unclear. Yet, the stimulus is now in and my bet is that it will be effective at reviving the economy and with it we will have a strong second half growth in demand," said Rystad Energy research director Claudio Galimberti.
"As for the Fed (meeting), that is also uncertain but with latest inflation data coming in a 4%, they have room to be dovish," Galimberti added.
Looking to boost growth, China on Tuesday cut its benchmark loan prime rates (LPR) for the first time in 10 months, with a smaller-than-expected 10-basis-point reduction in the five-year LPR.
The rate reduction followed recent economic data showing the China's retail and factory sectors were struggling to sustain momentum from earlier this year.
(Reuters)
