Oil dipped ahead of testimony from Federal Reserve Chair Jerome Powell that will provide clues on the path forward for monetary tightening.
(Bloomberg) — Oil dipped ahead of testimony from Federal Reserve Chair Jerome Powell that will provide clues on the path forward for monetary tightening.
West Texas Intermediate traded below $80 a barrel after advancing for five sessions, while the dollar advanced. Powell will begin two days of semiannual testimony before Senate and House committees in Washington later on Tuesday. Traders are predicting a hawkish mantra as inflation has proven to be persistent, increasing the likelihood that rates will be elevated for longer, boosting the dollar and pushing down commodities.
Crude has endured a bumpy year, whipsawed by concerns over further interest rate hikes from the Fed and a bullish outlook for Chinese demand following the end of Covid Zero. Fluctuations in price and a lack of clear direction have persisted, but prices continue to trade within a $10 range since early December.
However, the world’s top oil importer has set a cautious economic growth target this year, denting some optimism in the outlook. Its crude imports eased at the start of the year as refiners slowed purchases before the Lunar New Year holiday, government data released Tuesday show.
“Yesterday, oil started negative and had a strong ending, today’s looking the other way around, like the hangover after the party.” said Giovanni Staunovo, a commodities analyst at UBS Group AG. “It looks like macro factors outside of oil are driving commodities – likely the dollar weighing on the oil price.”
Traders are also tracking Russian energy flows following sanctions over the nation’s war in Ukraine. Russia’s seaborne crude exports fell sharply last week from previous highs as shipments from its Pacific ports declined, vessel-tracking data compiled by Bloomberg show. The Kremlin thinks that the price cap on oil is set high enough, as they’re virtually non-existent at current levels, according to an Interfax report.
Kazakhstan is struggling to find ample crude supplies to meet requests from European countries that are seeking to curb their dealings with Russia. Germany is expected to receive about 40,000 tons of piped deliveries this quarter, state pipeline operator KazTransOil said. That’s about 90% of the original planned volume.
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