👀 Ones to watch: The MOST undervalued stocks to buy right nowSee Undervalued Stocks

Oil prices nurse steep losses as markets look to Fed minutes

Published 01/04/2023, 10:08 AM
© Reuters.
LCO
-
CL
-
DXY
-

By Ambar Warrick

Investing.com-- Oil prices steadied on Wednesday after a weak start to 2023 amid increased fears of a looming recession, with markets now awaiting more cues on U.S. monetary policy from the minutes of the Federal Reserve’s December meeting.

Crude markets were dealt a double whammy in their first trading session for the year after the International Monetary Fund warned of a potential global recession in 2023, while uncertainty over rising COVID-19 cases in China also cast doubts over a recovery in oil demand.

Brent oil futures were unchanged around $82.31 a barrel, while West Texas Intermediate futures steadied at $77.0 a barrel by 21:21 ET (02:21 GMT). Both contracts plummeted over 4% each on Tuesday.

A sharp recovery in the dollar also weighed on crude prices, with the dollar index surging more than 1% on Tuesday as traders positioned for the minutes of the Fed’s December meeting, due to be released later on Wednesday.

Focus will be on whether policymakers support a further slowing in interest rate hikes, following an increasing number of signs that U.S. inflation has likely peaked. But given that inflation is still trending well above the Fed’s target range, markets remained on edge.

A slew of U.S. data this week is also expected to shed more light on the world’s largest oil consumer, starting with manufacturing activity data for December due later in the day. Nonfarm payrolls data for December, due on Friday, is also expected to provide more insight into the jobs market.

Traders fear that a sustained rise in U.S. interest rates could weigh on economic activity and potentially trigger a recession in 2023 - a scenario that is negative for crude demand. The prospect of a recession triggered wild swings in oil prices through 2022, and is expected to cause more volatility in the near-term.

Concerns over a delayed economic recovery in China were also heightened after President Xi Jinping struck a more cautious tone than expected during his new year's address. The country is grappling with an unprecedented spike in COVID-19 cases after it relaxed several restrictions in December.

Analysts warned that rising infections in the country are likely to delay an economic reopening, and could potentially damage the Chinese economy even further in the near-term. The country is the world’s largest oil importer, and saw a drastic weakening in demand due to disruptions caused by the COVID-19 pandemic.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.