June 20, 2023 (MLN): Oil prices rose on Tuesday, erasing losses attributed to China cutting benchmark lending rates less than some expected, sowing further concern over the oil demand outlook in the world's largest crude importer.
Brent crude is currently trading at $76.44 per barrel, up by 0.54% on the day.
While West Texas Intermediate crude (WTI) is trading at $71.70 per barrel, up by 0.55% on the day.
China on Tuesday cut two benchmark lending rates – its one-year loan prime rate (LPR) and the five-year LPR – by 10 basis points each, as Reuters reported.
Tina Teng, a markets analyst at CMC Markets in Auckland stated, "The rate cuts … were widely expected, hence it did not offer a bullish push to the oil markets,"
"Oil traders may need to see a materialized strong economic rebound in China to improve their outlook on oil demand," she added.
The rate reduction is a consequence of recent economic data that showed China's retail and factory sectors are struggling to sustain the momentum seen earlier this year.
The Bank of England will also meet on Thursday and is expected to raise interest rates by 25 bps to a 15-year high of 4.75%.
Markets are pricing in a 73.2% probability of the Fed hiking rates by 25 bps in July before holding steady for the remainder of the year, according to CME Fed WatchTool.
Interest rates and oil demand have an inverse relation, as higher interest rates diminish the likelihood to spend which can exert downward pressure on the demand for oil.
With respect to the supply side, Iran’s crude exports and production have reached new heights in 2023 despite the sanctions imposed by the U.S.
Russia is also set to increase seaborne diesel and gasoil exports this month, outweighing cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Moscow itself.
The OPEC+ cuts are not enough to bring global supply and demand into balance even if they are extended to 2024, JPMorgan analysts said.
Copyright Mettis Link News
Posted on: 2023-06-20T14:29:31+05:00
