By Peter Nurse
Investing.com — Oil prices edged higher Wednesday, stabilizing after the selloff from the previous two sessions as weak Chinese economic data and hawkish comments from Fed chair Jerome Powell prompted concerns over future crude consumption.
By 08:45 ET (13:45 GMT), U.S. crude futures traded 0.5% higher at $77.17 a barrel, while the Brent contract rose 0.6% to $83.29 a barrel. Both benchmarks declined between 4% and 5% over the previous two days.
Inflation data released earlier Thursday in China, the largest importer of crude in the world, came in much weaker than expected for February, with a sharper-than-expected drop in producer prices suggesting that the important manufacturing sector was running well below full capacity.
This followed the Chinese government setting a softer-than-expected GDP target for 2023 over the weekend, raising doubts about the strength of the likely economic rebound in China this year.
Data released earlier this week showed Chinese crude oil imports came in down 1.3% from a year earlier over the first two months of 2023.
Adding to this negative sentiment were the hawkish comments by Federal Reserve Chairman Jerome Powell, in his two-day semi-annual testimony to Congress.
Powell made it clear that interest rates will rise more than previously expected if economic data suggest they are needed to combat inflation, which could well have an impact on economic and demand growth in the largest crude consumer in the world.
These comments also help support the U.S. dollar, which climbed to three-month highs against a variety of rival currencies.
A strong dollar makes crude, and other commodities which are denominated in dollars, more expensive for buyers paying in other currencies.
There is also uncertainty about global supply, with S&P GIobal Vice Chairman Dan Yergin stating that Russia can maintain crude production longer than many expect, despite the exodus of many Western companies and sanctions from the U.S. and allies.
“There’s going to be a decline but it’s gonna be a slower decline,” Yergin told Bloomberg TV on Wednesday. It won’t be “the dramatic fall off a cliff that some people projected a year ago.”
This bearish tone has overshadowed the news that U.S. crude inventories fell for the first time this year.
Wednesday’s official figures from the Energy Information Administration showed that the country’s crude stocks fell 1.694 million barrels last week to end a 10-week run of increases.