Oil prices posts first loss in 6 sessions after disappointing China import data, Powell’s remarks

Oil futures posted a loss on Tuesday for the first time in six sessions, pressured by weaker-than-expected import data from China and remarks from the Federal Reserve Chairman Jerome Powell that raised the potential for more aggressive interest-rate hikes.

Price action

West Texas Intermediate crude for April delivery
CL00,
+1.27%
CL.1,
+1.27%

CLJ23,
+1.27%
fell $2.88, or 3.6%, to settle at $77.58 a barrel on the New York Mercantile Exchange.
May Brent crude
BRN00,
-0.17%
BRNK23,
-0.17%,
the global benchmark, lost $2.89, or nearly 3.4%, to close at $83.29 a barrel on ICE Futures Europe. Prices for the global benchmark, as well as WTI oil posted gains in each of the last five trading sessions.
Back on Nymex, April gasoline
RBJ23,
-0.14%
fell 3.4% to $2.7007 a gallon, while April heating oil
HOJ23,
+0.31%
dropped 3.1% to $2.7975 a gallon.
April natural gas
NGJ23,
+0.25%
rose 4.5% to $2.687 per million British thermal units.

Market drivers

“Tight global supply, war, sanctions on Russia oil and the rising Chinese and global demand tilt the balance for higher oil prices in the medium run,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank, in a daily note.

“But higher energy prices mean higher inflation, and higher inflation means tighter monetary policies which, in return, increase the global recession odds, and could weigh on oil prices,” she said.

Federal Reserve Chairman Jerome Powell’s testimony to Congress this week was expected to offer some hints on the path for interest rates. Powell testified Tuesday to the Senate Banking Committee and will testify to the House Financial Services panel on Wednesday.

On Tuesday, Powell pledged to continue the battle against inflation and left the door open for accelerating the pace of monetary tightening, if necessary.

Meanwhile, crude also declined on the back of data showing China’s imports fell 10.2% during the first two months of the year, compared with a 7.5% decline in December and the 5.1% drop expected by the economists. China’s customs bureau releases trade data for the first two months of the year together to eliminate distortions from the Lunar New Year holiday, which fell in January this year.

The data showed that crude-oil imports remained weak as refiners eased up on purchases ahead of the Lunar New Year holiday, wrote analysts at ING, in a note.

They noted that oil imports fell 1.3% year over year to the equivalent of 10.44 million barrels a day over January and February, while fuel exports rose 74% year over year and imports rose only 14%.

“Supply constraints on Russian refined products appear to have supported demand for Chinese fuel products. Looking ahead, China’s crude oil imports could recover over the next quarter as industrial activity picks up and refiners rebuild their stocks,” the analysts wrote.

Natural-gas futures, meanwhile, ended higher to recoup just a portion of the more than 14% loss they saw Monday.

In a monthly report, Energy Information Administration reduced its 2023 price forecast for U.S. natural gas and said it expects to see the lowest domestic first-quarter consumption of natural gas since 2018.

The EIA said U.S. natural-gas prices will likely average $3.02 per million British thermal units this year, down 11.2% from the February forecast.

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