The price of a barrel of oil rose globally by about 2% at the end of trading today, Wednesday, June 21 (2023), in an attempt to compensate for the losses it suffered during the previous two sessions.
And oil prices received support from the statements of the Federal Reserve Chairman, the possibility of adopting more interest rate hikes to counter inflation and the possibility of a decline in US oil stocks, despite concerns about oil demand in China.
The global price of a barrel of oil today
At the end of the session, Brent crude futures – for August 2023 delivery – rose by 1.6%, to record $77.12 a barrel.
Meanwhile, futures contracts for West Texas Intermediate crude – August 2023 delivery – increased by about 1.9% to $72.53 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.” .
Indeed, Federal Reserve Chairman Jerome Powell said, in his testimony before Congress, that the US central bank is likely to decide on more interest rate hikes until inflation reaches close to the 2% target.
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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