Oil prices made a modest recovery on Thursday, regaining some of the ground lost in the previous day’s sharp decline due to apprehensions about future US interest rate hikes. Market focus has now shifted towards crucial economic data from China, which is expected to provide insights into oil demand trends.
At 0009 GMT, Brent crude futures experienced a marginal increase of 21 cents, equivalent to a 0.3% rise, reaching $73.41 per barrel. Meanwhile, US West Texas Intermediate (WTI) crude stood at $68.50 per barrel, up by 23 cents, indicating a 0.4% gain.
Both benchmarks encountered a 1.5% drop on Wednesday following the announcement by the US Federal Reserve regarding additional rate hikes this year. This development sparked concerns that a higher interest rate environment could potentially slow down the economy and reduce oil demand.
Furthermore, the strengthened US dollar resulting from higher interest rates renders commodities priced in the US currency more expensive for holders of other currencies. On Thursday, the US dollar registered a 0.5% increase against a basket of currencies during early trading.
Attention has now turned to China, the largest global oil importer, as it is set to release critical economic data for May, including retail sales and industrial production. Investors are eagerly awaiting signs of improvement in the country’s uneven economic recovery or indications of potential stimulus measures from Beijing.
Adding to concerns about weaker fuel demand, the European Central Bank is poised to raise borrowing costs to their highest level in 22 years on Thursday, leaving the door open for further rate hikes. According to a Reuters poll of economists, the Bank of England is also expected to continue raising rates as it combats inflation.
In another bearish signal for oil demand, US crude oil stocks witnessed an increase of approximately 8 million barrels during the week ending June 9, according to data from the Energy Information Administration.
This figure stands in stark contrast to analysts’ predictions of a 500,000-barrel decline. Additionally, gasoline and diesel stocks recorded higher-than-expected increases.
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