The price of a barrel of oil rose globally during trading today, Wednesday, June 21 (2023), in an attempt to compensate for the losses it suffered during the previous two sessions.
Expectations that the head of the Federal Reserve will present a plan to revive the economy, confront inflation, and the possibility of a decline in US oil stocks overshadowed concerns about oil demand in China.
The global price of a barrel of oil today
By 07:05 am GMT (10:05 am Mecca time), Brent crude futures – for August 2023 delivery – rose by 0.32%, to record $ 76.14 a barrel.
Meanwhile, West Texas Intermediate crude futures – August 2023 delivery – increased by 0.14% to $71.29 a barrel, according to figures seen by the specialized energy platform.
And the global price of a barrel of oil ended trading, yesterday, Tuesday, June 21, down by about 2%, after China cut interest rates on lending by less than expected, which raised concern about the expectations of oil demand in the largest importer of crude in the world.
Oil price analysis
Analysts from ANZ Research said, “We expect Fed Chair Jerome Powell to deliver a hawkish semi-annual testimony to Congress that reflects the FOMC’s average expectation of higher interest rates in the coming months and more resilient inflation in the near term.” .
Powell’s congressional testimony later on Wednesday is expected to provide clues to future interest rate movements in the world’s largest economy.
Two Fed policymakers and an economist said their focus is on bringing down very high inflation so the US economy can return to sustainable growth, which in turn could boost demand for oil.
US oil stocks
A possible decline in US oil stocks supported the price of a barrel of oil globally, as a Reuters poll – including 5 analysts – predicted that crude stocks fell by about 400,000 barrels on average during the week ending June 16.
US oil inventory data will be released from the American Petroleum Institute later on Wednesday and the Energy Information Administration on Thursday, with both reports delayed by one day after the June holiday on Monday.
The lack of clarity about the speed of demand recovery in China, the world’s largest oil importer, also limited gains in the price of a barrel of oil globally although analysts were optimistic that lowering the initial interest rates for loans could raise demand soon.
Chinese demand for oil
“The only reason I think the global price of oil is not rising steadily yet is that the data from China is still not clear,” said Claudio Gallimberti, director of research at Rystad Energy.
He added, “However, the stimulus is now there, and I bet it will be effective in reviving the economy, which could bring strong growth in oil demand during the second half.”
“As for the Fed meeting, that’s uncertain -too-, but with the latest inflation data at 4%, they have room to be pessimistic,” Galimberti explained.
In an effort to boost growth, China on Tuesday cut its lending rates for the first time in 10 months, with a 10-basis-point lower-than-expected cut for 5 years.
CMC Markets analyst Leon Lee said lower lending rates are expected to lift demand in the second half.
He added, “The Ministry of Commerce is also planning to implement more policies to stimulate consumption, and the possibility of further interest rate cuts in the second half of the year cannot be ruled out.”
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