Oil Trading Tepid As Interest Rate Hike Fears Trump China's Gains

Meanwhile, the U.S. is expected to see another stockpile decline: File Image/Pixabay

Oil traders for a second session this week decided to ignore bullish news and focus on their ongoing concern over a possible increase in U.S. interest rates, and this caused two key benchmarks on Tuesday to slip, albeit minimally.

Brent fell by 18 cents to $84.58 per barrel by 1336 GMT, and West Texas Intermediate dipped by 2 cents to $80.81 as a result of fears that the Federal Reserve will raise rates by 25 basis points at its May meeting.

The declines came despite forecasts that U.S. crude inventories have fallen by about 2.5 million barrels, along with declines in gasoline and distillates.

Even more significantly, oil's tepid performance on Tuesday was despite news that China's economy grew more than calculated, by 4.5 percent in the first quarter, according to the National Bureau of Statistics, compared with expectations for a 2.2 percent increase and a revised 0.6 percent rise in the previous quarter.

For the record, the Chinese government has set a target for economic growth of around 5 percent for this year, after missing its 2022 goals.

Oil trading on Tuesday was also negatively affected by the Iraq federal and Kurdistan regional governments moving towards resumption of oil exports, from the Turkish port of Ceyhan after being halted last month.

According to a source familiar with the matter, discussions will focus on preparations for resuming exports, terms and conditions for pricing crude oil sales through SOMO, the proposed mechanism for paying international oil firms' debts and their share of future oil export sales.

With regards to oil trading patterns in the near-term, Craig Erlam, analyst at OANDA, said, "The next step may depend on global growth and whether the economy can weather the recent storm, particularly in the U.S., where tighter credit could significantly weigh on growth for the rest of the year."