Oil creeps higher as dollar weakens, markets await central banks

Investing.com -- Oil prices rose slightly in early Asian trade on Tuesday, taking some support from a weaker dollar as caution set in before a string of central bank rate decisions and key economic indicators over the coming weeks.

Crude markets were sitting on some gains over the past two sessions, aided largely by some weakness in the dollar and as investors bet that Chinese consumption will fuel a recovery in demand.

Chinese travel demand was seen recovering sharply ahead of the May Day holiday, particularly through increased bookings for trips abroad. But the numbers were still well below pre-COVID levels, Reuters reported.

Recent data also showed that fuel imports to the country rose to record levels in March. But signs of an uneven economic recovery have kept optimism over a Chinese rebound limited, especially as the country’s manufacturing sector continues to struggle.

Brent oil futures rose 0.4% to $82.75 a barrel, while West Texas Intermediate crude futures rose 0.3% to $78.99 a barrel by 21:11 ET (01:11 GMT). Both contracts rose between 0.8% and 1.2% on Monday.

Weakness in the dollar, amid some volatility ahead of a Federal Reserve meeting next week, helped spur some gains in crude prices over the past two sessions, as did some stronger-than-expected U.S. manufacturing readings.

Markets are largely split over the path of U.S. monetary policy this year. While the central bank is widely expected to hike rates by 25 basis points next week, markets are still uncertain over when the Fed will pause its rate hike cycle, and whether it will even cut interest rates this year.

Focus this week is also on U.S. GDP data for the first quarter of 2023, which is expected to show some cooling in growth amid high interest rates and inflation. Fears of slowing economic growth have weighed heavily on crude markets this year, amid growing concerns that an economic slowdown will stymie oil demand.

Apart from the Fed, central bank meetings in Japan, the UK, and the euro zone are on tap in the coming week. The European Central Bank and the Bank of England are widely expected to hike rates further, while the Bank of Japan is set to maintain its ultra-dovish stance.