According to New Dawn Nigeria, oil prices have risen to $76.13 per barrel.
This rebound comes after two consecutive sessions of losses.
The increase can be attributed to expectations of potentially hawkish Federal Reserve comments later in the day, as well as the possibility of U.S. crude stock drawdowns.
These factors have outweighed concerns over China’s demand for oil.
Brent futures have strengthened by 23 cents, reaching $76.13 a barrel, while U.S. West Texas Intermediate (WTI) crude futures have risen by 26 cents to reach $71.45 a barrel as of 0611 GMT.
The upward movement in oil prices reflects the current market dynamics and the influence of various economic and geo-political factors.
“We expect Fed Chair (Jerome) Powell to deliver a hawkish semi-annual testimony to Congress reflecting the FOMC’s median projection for higher interest rates in coming months and more resilient inflation in the near term,” ANZ Research said in a note, referring to the central bank’s Federal Open Market Committee.
The congressional testimony by Federal Reserve Chairman Jerome Powell, scheduled for later on Wednesday, is anticipated to provide insights into potential future interest rate decisions in the United States, the world’s largest economy.
On Tuesday, two Federal Reserve policymakers and an economist nominated to join the central bank’s board emphasized their focus on reducing high inflation levels in order to foster sustainable economic growth.
This commitment to controlling inflation could have a positive impact on oil demand.
Furthermore, the possibility of a decrease in U.S. crude stocks has supported oil prices. A Reuters poll of five analysts estimated that crude stockpiles may have declined by approximately 400,000 barrels on average in the week ending June 16.
The official U.S. oil inventory data from the American Petroleum Institute (API) will be released later on Wednesday, followed by the Energy Information Administration (EIA) report on Thursday, both delayed by a day due to the Juneteenth public holiday on Monday.
However, concerns over the pace of demand recovery in China, the world’s largest oil importer, have tempered price gains. Nonetheless, analysts remain hopeful that the recent reduction in loan prime rates (LPR) could stimulate oil demand in the near future.
“The only reason why I think prices are not climbing steadily yet is because the data from China is still unclear. Yet, the stimulus is now in, and my bet is that it will be effective at reviving the economy, and with it, we will have strong second-half growth in demand,” said Rystad Energy research director Claudio Galimberti.
“As for the Fed meeting, that is also uncertain, but with the latest inflation data coming in at 4%, they have room to be dovish,” Galimberti added.
In an effort to stimulate economic growth, China implemented a cut in its benchmark Loan Prime Rate (LPR) on Tuesday. This marked the first rate reduction in 10 months, with the five-year LPR experiencing a smaller-than-anticipated decrease of 10 basis points.
Analyst Leon Li from CMC Markets noted that the lowered LPR is expected to have a positive impact on demand in the second half of the year. The rate cut is part of China’s broader strategy to support economic expansion and encourage lending activity.
“The Ministry of Commerce also plans to implement more policies to stimulate consumption,” he said. “The possibility of further lowering interest rates in the second half of the year cannot be ruled out.”