© Reuters.
By Ambar Warrick
Investing.com–Oil prices kept to a tight range on Wednesday as concerns over rising interest rates and stubborn inflation kept buying limited, while markets appeared to have toned down their bets on a China-driven demand recovery amid middling signals from the country.
Crude markets were awaiting more cues on monetary policy from the of the Federal Reserve’s February meeting, due later in the day. The minutes are largely expected to reiterate the central bank’s hawkish rhetoric, given that U.S. inflation remained stubbornly high in January.
A reading on the – the Fed’s preferred inflation gauge, due later in the week, is also expected to show that inflation remained high in January, which in turn gives the central bank more impetus to keep raising interest rates.
rose 0.1% to $82.97 a barrel, while fell 0.1% to $76.30 a barrel by 21:39 ET (02:39 GMT). Both contracts plummeted over 1% each on Tuesday.
Stronger-than-expected U.S. for February also did little to stem a selldown in oil, given that strength in the U.S. economy gives the Fed more headroom to keep raising rates.
Rising interest rates are expected to stymie economic growth this year and severely crimp oil demand, especially in the U.S., Europe and other developed countries.
The rose after Tuesday’s reading, and was trading close to a six-week high against a basket of currencies on Wednesday. Strength in the dollar also tends to weigh on oil prices.
Markets also appeared to be scaling back bets that China will drive a demand recovery this year.
Citigroup’s Global Head of Commodities Research, Ed Morse, warned on Tuesday that oil demand in China was unlikely to exceed 2021 levels, and that a demand recovery in the country was “overanticipated.”
While Chinese oil consumption recovered after the country relaxed most anti-COVID restrictions, demand is still seen below pre-pandemic highs. Travel demand also appeared to have stabilized after peaking in late-January.
“After this recovery, it’s the last hurrah for demand in China and close to the last hurrah for demand around the world,” Morse said in an interview with Bloomberg.
His comments largely contradicted recent forecasts from the Organization of Petroleum Exporting Countries and the International Energy Agency that a Chinese recovery will drive oil demand to record highs this year.
