Oil falls in China’s outlook as investors await Fed cues
- China’s growth prospects down from last year’s target
- Fed Chair to Address Congress This Week
- US February job reports also in focus
LONDON, March 6 (Reuters) – Oil prices fell on Monday after China set a lower-than-expected target for economic growth this year of around 5% and as investors awaited testimony from U.S. Federal Reserve Chairman Jerome Powell this week.
Brent crude futures traded down 60 cents, or 0.7%, at $85.23 a barrel by 1520 GMT. US West Texas Intermediate (WTI) crude futures were down 47 cents, or 0.6%, at $79.21.
“Crude remains in a tug of war between optimism over Chinese reopening and nervousness over a hawkish Fed hurting the US economy,” said Vandana Hari, founder of oil market analysis provider Vanda Insights.
China’s closely watched growth outlook, announced on Sunday, was lower than last year’s target of 5.5% for gross domestic product (GDP) growth. GDP grew last year by just 3%. Political sources had told Reuters the target could be set as high as 6% by 2023.
Premier Li Keqiang said on Sunday that the foundations for stable growth in China needed to be consolidated, that insufficient demand remained a pronounced problem and expectations of private investors and businesses were volatile.
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“It’s safe to say markets were surprised by the decision to target just 5% growth this year, while signaling no significant stimulus to turbocharge the economic recovery,” said Craig Erlam, senior market analyst at OANDA.
At the same time, oil prices are likely to be affected by interest rate hikes around the world as global central banks tighten policy amid fears of rising inflation.
Traders have started to pay attention to interest rate increases, but are hoping for smaller increases than last year.
The Fed’s Powell will testify before Congress on Tuesday and Wednesday, when he is likely to be asked whether bigger increases are needed in the world’s biggest oil-consuming country.
Future US interest rate hikes are also likely to depend on what the February payrolls report reveals on Friday, followed by the February inflation report next week.
Over the weekend, European Central Bank President Christine Lagarde said it is “very likely” the bank will raise interest rates this month to keep a lid on inflation.
Reporting by Noah Browning Additional reporting by Mohi Narayan in New Delhi and Sudarshan Varadhan in Singapore Editing by Jan Harvey and David Goodman
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