Oil prices dip as China GDP forecast underwhelms, Fed fears persist
By Ambar Warrick
Investing.com–Oil prices retreated on Monday as a weaker-than-expected GDP forecast from China dented some optimism over a recovery in crude demand this year, while markets also hunkered down before a slew of cues on U.S. monetary policy this week.
The Chinese government said over the weekend that it was targeting economic growth of 5% this year, up from 3% in 2022. But the forecast was regarded as softer than analyst expectations, with ING noting that the government was likely expecting a slowdown in overseas demand for Chinese goods.
The soft outlook for the Chinese economy undermined bets that a recovery in the country will drive oil demand to record highs this year, even as data last week indicated that recovered sharply after the lifting of anti-COVID restrictions.
fell 0.9% to $85.27 a barrel, while fell 0.6% to $79.17 a barrel by 20:37 ET (01:37 GMT).
Crude prices were still riding strong gains from the prior week, following better-than-expected Chinese economic data and shifting bets on the path of U.S. monetary policy this year.
Chinese and is due this week, and is expected to provide more cues on the economic state of the world’s largest oil importer.
Focus this week is also squarely on a testimony by on Tuesday, which is expected to shed more light on where U.S. interest rates could go this year.
Stronger-than-expected inflation readings had ramped up concerns of rising rates, supporting the dollar and weighing on crude markets. But a sharp reversal in the dollar had benefited crude prices by late-last week.
The steadied on Monday after stinging losses last week.
Markets fear that a slowdown in economic activity, caused by high interest rates, will stymie oil demand this year. Rising U.S. interest rates had battered crude markets through 2022, and have kept prices depressed so far in 2023.
Focus this week is also on data for February, due on Friday. Any signs of strength in the jobs market gives the Fed more economic headroom to keep raising interest rates.
High inflation in Europe is also expected to elicit a hawkish response from the European Central Bank, tightening global monetary conditions.