During Thursday's trading session, oil futures experienced a downside as demand fears are rising amid talks of more rate hikes. At the same time, the US inventory data is also awaited by the traders, with reports hinting a reduction in the crude stocks.
The WTI crude futures were last seen near $72.34 after losing 0.3% (19 cents), while the Brent Crude futures were trading at $76.92 after losing 0.3$ (20 cents). Overall, both crude benchmark indexes are down by 0.3% for the day.
Earlier, both of these benchmark indexes posted minor gains amid increasing prices of the US soybean and corn. For now, these commodities are trading at multi-month highs, which means crop shortfall is highly likely. This could potentially lead to a reduction in the blending of biofuels and thus improve the oil demand.
Jerome Powell: 2 More Rate Hikes On The Card
The biggest catalyst for the oil market was the comments from Fed Chair Powell. According to her testimony in the US Congress, she announced 2 more rate hikes (2 x 25 bps) to rein the high inflation in the USA. She also added that the estimate of two additional rate hikes is a very good guess.
The idea behind raising interest rates is to increase the cost of borrowing for consumers and companies. This will put a stop to economic growth and thus lower inflation. And we all know that weak economic growth means reduced oil demand as well.
Despite the negative news, oil prices are still clinging to gains of the earlier session which tells us that the market players are looking for fresh drivers.
The biggest factor that could boost the oil demand and its prices is the optimism from China. After the lowering of interest rates in China and the possibility of stimulus measures, oil consumption could turn higher.
That's why the oil traders are now putting all their bets on the economic rebound in China. Any further measures to prop up the Chinese economy by the government will be seen as a bullish sign for the oil markets.