Oil dropped as concerns over tighter US monetary policy overshadowed optimism about a recovery in Chinese demand.
(Bloomberg) — Oil dropped as concerns over tighter US monetary policy overshadowed optimism about a recovery in Chinese demand.
West Texas Intermediate fell toward $74 a barrel after closing 1.2% higher on Monday. Two Federal Reserve officials said the central bank will likely need to raise interest rates above 5% before pausing and holding to combat inflation. The comments also weighed on Asian stocks and other commodities.
Oil rallied Monday after Beijing provided refiners and traders with a generous import quota in its second allocation for 2023, as Asia’s biggest economy gears up for growth after dismantling its strict Covid restrictions late last year.
“Dollar weakness and growing optimism around the China demand story has provided support to prices,” said Warren Patterson, the Singapore-based head of commodities strategy at ING Groep NV. “However, in the near term, the market still appears comfortably supplied.”
Crude has had a sluggish start to the year as thin liquidity exacerbates price swings and forward curves signal ample supply. Russian oil exports made a small gain last week, but that wasn’t enough to reverse a downtrend in shipments to a diminished group of buyers.
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