Crude oil prices edged down today due to disappointing Chinese economic data, despite Federal Reserve Chairman Jerome Powell’s indications of potential interest rate cuts. China’s latest CPI figures, which showed a smaller-than-expected rise in prices, raised worries about consumer demand in the world’s largest oil importer.
On a positive note, oil prices received a boost from the American Petroleum Institute’s latest inventory report, revealing declines in both crude and fuel stocks. This reversed a three-day slide in the market benchmarks.
During his Senate testimony, Powell remarked that the U.S. economy was no longer overheated and highlighted a balanced labor market. He emphasized that the Fed was cautious about potential risks and not rushing into rate cuts.
Pressure from Democratic lawmakers to expedite rate cuts ahead of the November 5 elections contrasts with Republican concerns over inflation’s impact on households.
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Analysts suggest that while Powell’s comments indicate a leaning towards rate cuts, the Fed still requires more favorable economic indicators before making a decision. This suggests any positive impact on oil prices could be temporary and vulnerable to economic data releases.
Commenting on Powell’s testimony, ANZ analysts noted improvement in second-quarter data and its potential to bolster confidence in inflation trends. Meanwhile, ING’s Warren Patterson observed that Powell’s remarks align with earlier expectations of a rate cut, likely not before September. He added that concerns over Chinese oil demand, exacerbated by weaker-than-anticipated inflation data, persist.