On worries about rate increases and China's doom, oil prices decline in early trade

23 Aug 2023 , 10:03 AM

Early Wednesday trading saw a decline in oil prices as investors worried that U.S. interest rates would rise longer than expected and that China, the world’s largest crude importer, might see its economic development slow down even more.

Brent crude had down 17 cents, or 0.2%, to $83.86 per barrel, while U.S. West Texas Intermediate crude had fallen 8 cents, or 0.1%, to $79.56 per barrel.

Tuesday saw a loss of around 0.5% for both benchmarks.

When policymakers from the Federal Reserve, the European Central Bank, the Bank of England, and the Bank of Japan travel to Jackson Hole, Wyoming, later this week for their annual central bank conference, the markets are waiting for clues about the outlook for interest rates.

The second-largest economy in the world, China, is seen as essential to bolstering oil demand for the remainder of the year. Markets have been irritated by its slow growth as promised stimulus hasn’t materialized as expected, including a smaller-than-expected reduction in a key lending benchmark on Monday.

As part of an agreement between members of the Organisation of the Petroleum Exporting Countries and its allies, also known as OPEC+, to reduce supplies and support prices, Saudi Arabia has offered to reduce output by an additional 1 million barrels per day (bpd) from July through September, and Russia plans to cut exports by 500,000 bpd in August.

Meanwhile, according to market sources citing American Petroleum Institute data on Tuesday, oil stocks in the United States kept declining, falling by roughly 2.4 million barrels in the week ended August 18.

According to a Reuters survey, analysts had predicted a decline of 2.9 million barrels, thus this dip was just less than that. On Wednesday at 14:30 GMT, the Energy Information Administration, the U.S. Department of Energy’s statistical division, is expected to release its weekly report.

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