Oil edged lower on Tuesday on expectations that further interest rate hikes in the United States, the world’s biggest oil user, will slow economic growth and limit fuel demand.
Brent futures for March delivery fell 43 cents to $79.22 a barrel, a 0.5% drop, by 0522 GMT. U.S. West Texas Intermediate crude fell 36 cents, or 0.5%, to $74.27 per barrel.
Both benchmarks climbed 1% on Monday, after China, the world’s biggest oil importer and second-largest consumer, opened its borders over the weekend for the first time in three years.
Two United States Federal Reserve officials this week expected the Fed policy rate – now at 4.25% to 4.5% – to need to rise to a 5% to 5.25% range to bring higher inflation rates under control.
“(The expectation) is more hawkish than what markets are pricing at the moment (4.75-5% range),” said Yeap Jun Rong, Market Analyst at IG in a note, adding that the upcoming speech from Fed chair Jerome Powell later on Tuesday could mirror the hawkish tone with some pushback as well.
Fed policymakers said fresh inflation data out later this week will help them decide whether they can slow the pace of interest rate hikes at their upcoming meeting, to just a quarter point increase instead of the larger jumps they used for most of 2022.
China also issued a second batch of 2023 crude import quotas, according to sources and documents reviewed by Reuters on Monday, raising the total for this year by 20% from the same time last year.