TOKYO: Oil prices fell as jitters over economic impact of US Federal Reserve potentially raising interest rates and weaker Chinese manufacturing data were enough to outweigh support from new OPEC+ supply cuts taking effect this month.

Brent futures for July delivery were down 56 cents, or 0.7 percent, at $ 79.77 a barrel while US West Texas Intermediate (WTI) crude lost 63 cents 0.8 percent drop to trade at $ 76.15.

US consumer spending was flat in March as an increase in outlays on services was offset by decline in goods, but persistent strength in underlying inflation pressures could see Federal Reserve raising interest rates again.

“Prospect of further rate hikes to be announced by Fed this week is expected to drive an increase in near-term price volatility,” said Baden Moore head of commodity and carbon strategy at National Australia Bank. Fed is expected to increase interest rates by another 25 basis points this week.

US central bank has raised its policy rate by 475 basis points since March of last year from near-zero level to current 4.75 percent-5.00 percent range.

Reserve Bank of Australia is widely expected to extend rate hike pause on Tuesday and European Central Bank could surprise with an outsized half-point increase on Thursday. Meanwhile China’s manufacturing purchasing managers’ index (PMI) declined to 49.2 from 51.9 in March, official data showed, slipping below 50-point mark that separates expansion and contraction in activity on monthly basis.

“Investors remain cautious amid mixed economic signals. Brent crude has been tracking broader markets in recent sessions, with slew of economic data creating more uncertainty about outlook,” ANZ Research said in client note.

Published in The Daily National Courier, May, 02 2023

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