Oil Price Fundamental Daily Forecast – Rate Hike Fears, Modest Economic Growth for China Capping Gains

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging lower on Monday in a volatile session. The markets opened the session down after China set a lower-than-expected target this year at around 5%.

Prices slightly recovered shortly after the opening when top crude exporter Saudi Arabia raised prices for the flagship Arab light crude it sells to Asia for a second month in April. But the rise to $2.50 a barrel above the Oman/Dubai average wasn’t enough to sustain the rally.

At 07:40 GMT, April WTI crude oil is trading at $79.34, down $0.34 or -0.43%, and May Brent crude oil is at $85.41, down $0.42 or -0.49%. On Friday, the United States Oil Fund ETF (USO) settled at $69.85, up $1.55 or +2.27%.

Investors are also cautiously awaiting U.S. Federal Reserve Chair Jerome Powell’s testimony on Tuesday and Wednesday. His remarks could influence Treasury yields and the U.S. Dollar. The latter could have a substantial effect on foreign demand for crude oil.

China Sets Modest Growth Target of about 5% as Parliament Opens

China set a modest target for economic growth this year of around 5% on Sunday as it kicked off the annual session of its National People’s Congress (NPC), which is poised to implement the most significant government shake-up in a decade, Reuters reported.

In his work, outgoing Premier Li Keqiang stressed the need for economic stability and expanding consumption, setting a goal to create around 12 million urban jobs this year, up from last year’s target of at least 11 million, and warned that risks remain in the real estate sector, Reuters said.

This year’s growth target of around 5% was at the low end of expectations, as policy sources had recently told Reuters a range as high as 6% could be set. It is also below last year’s target of around 5.5%.

Saudi Arabia Raises Arab Light Crude Price to Asia for 2^nd Month in April

Top crude exporter Saudi Arabia raised prices for the flagship Arab light crude it sells to Asia for a second month in April to $2.50 a barrel above the Oman/Dubai average, Aramco said on Sunday night.

The price hike – 50 cents a barrel higher than the March official selling prices – was in line with a Reuters survey, as signs of an economic rebound in China raised expectations for a pickup in fuel demand from the world’s top oil importer.

Short-Term Outlook

Federal Reserve Chair Jerome Powell will testify to Congress on Tuesday and Wednesday. He will likely be quizzed on whether more extensive hikes are needed in the world’s biggest oil-consuming country.

The Fed’s future rate hikes will likely depend on what the February payrolls report reveals on Friday, followed by the February inflation report due next week.

Rate hikes worldwide could also impact oil prices as global central banks tighten policy over fears of increasing inflation.