Crude oil lower; China import data weighs ahead of Powell testimony

By Peter Nurse   

Investing.com -- Oil prices fell Tuesday after weak data from top crude importer China raised doubts about the extent of the recovery in the world’s second largest economy.

By 09:00 ET (14:00 GMT), U.S. crude futures traded 0.7% lower at $79.72 a barrel, while the Brent contract fell 0.7% to $85.58 a barrel. 

Trade data released earlier Tuesday showed China imports running below expectations, slumping over 10% year-on-year in February, suggesting that domestic demand remained weak.

More specifically, crude oil imports came in down 1.3% from a year earlier over the first two months of 2023.

“China’s latest oil trade data hints at softer domestic demand which could weigh on sentiment in the short-to-medium term if imports do not recover,” analysts at ING said, in a note.

This followed Chinese government officials announcing over the weekend the lowest economic growth target for 2023 in over 30 years, disappointing traders after expectations had been ramped up by last week’s impressive business activity numbers.

That said, losses are limited as traders remain wary of taking strong positions ahead of Federal Reserve Chair Jeremy Powell's two-day testimony to Congress, starting later in the session.

Powell’s colleagues have tended to emphasize the need for the U.S. central bank to continue to lift interest rates to combat inflation, and if Powell continues with this hawkish talk then the dollar is likely to appreciate.

However, he mentioned "disinflation" at his last press conference and he may seek to temper the overall hawkish tone to provide the Fed with more flexibility to pursue the policies it deems necessary.

This would weaken the greenback, which typically increases demand for dollar-denominated oil from buyers paying with other currencies.

Also of interest later Tuesday will be the U.S. inventory data from the American Petroleum Institute.

Last week saw an increase in crude stocks of over 6 million barrels, but analysts now expect a pause in the recent string of increases in domestic stockpiles.