Oil prices slipped on Monday after China set a lower-than-expected target for economic growth this year at around 5 percent, and as investors cautiously awaited U.S. Federal Reserve Chair Jerome Powell’s testimony this week.
Brent crude futures were trading down 53 cents, or 0.6 percent, at $85.30 a barrel at 0735 GMT. U.S. West Texas Intermediate (WTI) crude futures were also down 0.6 percent at $79.21.
“Crude remains in a tug-of-war between optimism over Chinese reopening and nervousness over a hawkish Fed hurting the U.S. economy,” said Vandana Hari, founder of oil market analysis provider Vanda Insights.
China’s closely watched growth outlook, announced on Sunday, was lower than its 5.5 percent gross domestic product (GDP) growth target last year. GDP grew last year by just 3 percent.
Analysts at UBS Investment Bank upgraded their forecasts for China’s GDP growth to 5.4 percent for 2023 and to 5.2 percent for 2024 from 4.9 percent and 4.8 percent respectively.
Both crude benchmarks settled more than $1 higher on Friday.
Oil prices are likely to be impacted by rate hikes across the world as global central banks tighten policy over fears of increasing inflation. Traders have started factoring in rate hikes across the world, but are hoping for smaller increases than last year.
The United States Federal Reserve’s Chair Jerome Powell will testify to Congress on Tuesday and Wednesday, where he will likely be quizzed on whether larger hikes are needed in the world’s largest oil consuming country.
The United States’ future rate hikes are also likely to depend on what the February payrolls report reveals on Friday, followed by the February inflation report due next week.
Over the weekend, European Central Bank President Christine Lagarde said it was “very likely” they would raise interest rates this month to keep a lid on inflation.
