Oil prices steady on strong China data

Oil prices remained steady on Tuesday, with WTI prices fluctuating around the $80.1 per barrel level. If the WTI price declines, it may encounter support near $79.3 per barrel, while resistance may be found near $83.4 per barrel.

Increased US rate hike expectations counteracted upbeat data from China on Tuesday. China is the world’s largest energy importer and prolonged lockdowns have dampened oil demand. China's GDP data this week showed that the country’s economy grew by 4.5% in the first quarter of 2023. China’s economy seems finally to start recovering post-Covid. IMF estimates that the country’s GDP will grow 5.2% this year and 5.1% in 2024.

The Federal Reserve raised interest rates by only 25 basis points at its meeting in March, bringing the benchmark interest rate to a target range of 4.75% to 5.00%. Market odds are currently in favor of another 25-basis point rate hike at the Fed’s next meeting in May. 

The recent banking crisis has been driving oil prices down in the past few weeks. The potential of a banking sector meltdown has reduced the oil demand outlook, as recession concerns mount. Fears of a slowdown in the U.S. economy also put pressure on oil prices. Recession concerns run high and aggressive rate hikes stifle economic activity, putting a lid on oil prices. 

Oil prices surged however, after OPEC+ producers decided to reduce output by 1.1 million barrels per day, to offset the drop in oil prices from the global banking crisis. The cuts will start in May and last through the end of the year. 

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Written by:
Myrsini Giannouli

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