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Crude oil prices fell earlier today, starting the week with a decline on expectations of another rate hike by the Fed that combined with weaker-than-expected economic data from China to erase previous gains.
In morning trade in Asia Brent crude had fallen below $80, with West Texas Intermediate was down to a little over $76 per barrel. Both declines, however, were moderate, continuing a losing streak that began last week.
The U.S. Federal Reserve is expected to announce a 25-basis-point rate hike later this week as it continues to try and tame inflation that left consumer spending in the U.S. flat in March, with spending on goods down, although spending on services rose.
In news from China, the country’s purchasing managers’ index for March fell to 49.2 from 51.9 in March, sparking worry about the Asian powerhouse’s recovery. A reading of 50 separates growth from contraction.
"Investors remain cautious amid mixed economic signals. Brent crude has been tracking broader markets in recent sessions, with a slew of economic data creating more uncertainty about the outlook," ANZ analysts said in a note quoted by Reuters.
“Oil markets have completely faded the boost from the surprise OPEC+ cut earlier this month, and we think this primarily reflects deep pessimism about the macro outlook, with little evidence of incremental weakness in demand so far,” Barclays said last week.
The bank’s analysts, however, cautioned against underestimating OPEC+’s resolve to keep a tight grip on oil supply, suggesting that despite the recent slide, prices could yet live up to earlier forecasts that saw Brent breaching $100 again before this year’s end.
For now, however, pessimism about economic growth appears to have gained the upper hand among oil traders, keeping a lid on prices and reversing the gains oil made at the end of last week on another strong round of Big Oil quarterly results.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.