- China’s growth prospects are lower than last year’s target
- Fed chair speaks to Congress this week
- The US jobs report in February is also in the picture
LONDON, March 6 (Reuters) – Oil prices fell on Monday after China set a lower-than-expected target for economic growth of around 5% this year and investors awaited testimony from US Federal Reserve Chairman Jerome Powell this week.
Brent crude oil futures traded up 60 cents, or 0.7%, at 1520 GMT at $85.23 a barrel. U.S. West Texas Intermediate (WTI) crude oil futures fell 47 cents, or 0.6%, to $79.21.
“Crude remains in a tug of war between optimism about China reopening and nervousness about an aggressive Fed hurting the US economy,” said Vandana Hari, founder of Vanda Insights, an oil market analytics provider.
China’s closely watched growth outlook, announced on Sunday, fell short of last year’s target of 5.5% for gross domestic product (GDP) growth. GDP grew by only 3% last year. Policy sources had told Reuters that the 2023 target could be as high as 6%.
Premier Li Keqiang said on Sunday that the foundations for stable growth in China need to be strengthened, that insufficient demand remains a clear problem and that expectations from private investors and companies are unstable.
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“It is safe to say that markets were surprised by the decision to only target 5% growth this year when there was no significant stimulus to boost the economic recovery,” said Craig Erlam, senior market analyst at OANDA .
At the same time, oil prices are likely to be impacted by interest rate hikes around the world as global central banks tighten their policies amid fears of rising inflation.
Traders have begun to anticipate rate hikes, but are hoping for smaller increases than last year.
The Fed’s Powell will testify before Congress on Tuesday and Wednesday, when he is likely to be questioned on whether bigger hikes are needed in the world’s largest oil-consuming country.
Future rate hikes in the US will also likely depend on what the February salary report reveals on Friday, followed by the February inflation report next week.
Over the weekend, Christine Lagarde, president of the European Central Bank, said it was “highly likely” that the bank would raise rates this month to keep inflation under control.
Reporting by Noah Browning Additional reporting by Mohi Narayan in New Delhi and Sudarshan Varadhan in Singapore Edited by Jan Harvey and David Goodman
Our Standards: The Thomson Reuters Principles of Trust.
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