Oil steady as market awaits clarity on Fed rate hike

HOUSTON, Jan 10 (Reuters) – Oil prices were little changed in choppy trading on Tuesday as the market awaited the Federal Reserve’s plans for U.S. rate hikes to gauge their potential impact on the economy and fuel demand.

Brent futures for March delivery rose 27 cents, 0.3%, to $79.92 a barrel by 11:22 a.m. ET (16:22 GMT). U.S. crude rose 48 cents, or 0.6%, to $75.11 per barrel.

Two Fed officials said on Monday they expected the policy rate – now at 4.25% to 4.5% – would need to rise in steps to 5.0-5.25% to control inflation.

Fed Chair Jerome Powell avoided comments on monetary policy and the economy at a symposium, leaving traders to wait for U.S. CPI data on Thursday for indications on the near-term outlook.

Thursday’s data “could easily clarify the direction of the financial and oil markets for weeks to come”, said Tamas Varga of oil broker PVM.

He said the dollar would fall if inflation came in below expectations or was below the November reading, Varga added.

A weaker dollar can boost demand for oil, as dollar-denominated commodities become cheaper for holders of other currencies. The dollar hovered around its weakest level in seven months.

On Monday, both WTI and Brent climbed 1% 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.

China also issued a second batch of 2023 crude import quotas, raising the total for this year by 20% from last year.

“Crude is trying to solidify a bottom, as China has lifted most restrictions to international travel and trade,” said Dennis Kissler, senior vice president of trading at BOK Financial.

But analysts said a revival of Chinese demand may only give oil prices limited support under downward pressure from the global economy.

“Considering that the recovery of consumption is still at the expected stage, the oil price will most likely remain low and range-bound,” said analysts from Haitong Futures.

Barclays bank highlighted a $15-25 per barrel downside to its $98 per barrel Brent forecast for 2023 if a “slump in global manufacturing activity worsens similar to the 2009-09 episode”.

Separately, U.S. stockpiles of crude oil and distillates were expected to have fallen last week, a preliminary Reuters poll showed on Monday.

Industry group American Petroleum Institute is due to release data on U.S. crude inventories at 4:30 p.m. EDT (2030 GMT) on Tuesday.

Reporting by Rowena Edwards in London, additional reporting by Arathy Somasekhar in Houston, and Muyu Xu in Singapore; editing by Jason Neely, Mark Potter and David Gregorio

Our Standards: The Thomson Reuters Trust Principles.


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