Oil futures: US interest rate hike threat weighs on crude prices
Quantum Commodity Intelligence - Crude oil futures fell on Tuesday as prices reacted to expectations of further US interest rate hikes and a stronger dollar, with the market eased off from three-week highs touched earlier in the session.
May ICE Brent futures were trading at $83.93/b (1810 GMT), down 2.6% from Monday's settle of $86.18/b.
At the same time, Apr23 NYMEX WTI was trading at $78.09/b versus Monday's settle of $80.46/b.
That came as comments from US Federal Reserve Chairman Jerome Powell to Congress were taken as a signal to investors that further and bigger interest rate hikes were on the cards as a means of taming inflation.
That pushed the risk-off button for markets, with the pivot to cash driving the US dollar higher and weighing on commodity prices.
Oil markets had initially slipped on Monday after a bearish reaction to China's GDP growth forecast, although early losses reversed as the day wore on and continued into the overnight session as the country's growth prospects were reweighed in a more positive light.
"One big upside risk for oil prices this year was a strong, stimulus-driven, rebound in China and it would appear that isn't going to happen. That said, the growth target is probably a minimum aim and one that could easily be surpassed but it does make stimulus less likely," said Craig Erlam, senior market analyst at OANDA.
The relatively modest commitment from China's government was highlighted by several analysts, with Beijing seemingly looking to avoid a GDP miss in the coming financial year.
"Oil prices are dipping as China sets an easy-to-reach growth target of just 5%," said Phil Flynn of The Price Futures Group, commenting on Monday's initial losses: "But if you look at the surrounding evidence for the Chinese reopening, it's clear that China most likely is going to aim low so they can exceed expectations.
In the products market, Chinese demand continued to support Asian gasoline cargo prices as cracks touched their highest level in a month as China's reopening continued to consume barrels and tighten regional supply.
