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Oil prices surged to multi-week highs on Tuesday as markets awaited trade data from China to gauge the strength of crude demand in the country, although anticipation of Fed Chair Jerome Powell's testimony dampened broader sentiment.
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According to information we managed to gather from investing.com, after Chinese business activity data showed a stronger-than-expected rebound in February, the market is waiting to see if Chinese trade activity shows a similar improvement as the reading at 03:00 GMT. Particular focus will be on Chinese imports, which signal a recovery in oil demand after the country lifted most of its anti-Covid measures earlier this year. Brent crude futures rose to a five-week high of 0.3% to $86.53 a barrel. Meanwhile, WTI crude oil rose to a three-week high of 0.3% to $80.75 a barrel at 01:42 GMT. Both contracts closed higher in choppy trade on Monday. Both contracts are set for a sixth straight session of gains and are now trading slightly positive for the year.
Meanwhile, crude oil prices were initially pressured by a weaker-than-expected Chinese GDP forecast for this year. A prediction from a major producer that US oil production is peaking also helped prices rise in the later session on Monday. Oil prices were also supported by NYSE:GS which said prices are likely to break through $100 this year amid tight US supplies and recovering demand in China. However, a recovery in consumption in China is expected to push oil demand to a record high this year. The market is concerned that slowing economic growth around the world, especially rising interest rates, could offset this trend.
Testimony by Fed Chair Jerome Powell really takes center stage on Tuesday for further clues on U.S. monetary policy and how far interest rates will rise. Meanwhile, recent inflation data has come in stronger than expected, with other economic indicators showing U.S. growth cooling somewhat, signaling a larger slowdown later this year. The focus this week is also on the U.S. nonfarm payrolls report for February, with any resilience in the labor market giving the Fed more room to continue raising interest rates. Rising interest rates have weighed heavily on the crude market in 2022, and have kept oil prices in a tight range so far this year.
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