Oil prices hold steady as traders await economic data

In Asian trade on Thursday, oil prices maintained a tight grip as traders eagerly await critical economic data from the United States and China.

The previous session saw a surge in oil prices following the release of data that revealed a substantial drawdown in US inventories, surpassing expectations. This positive development, combined with the arrival of the summer season, heightened expectations of tightened supplies, bolstering the market sentiment.

Nevertheless, concerns persisted over the impact of rising US interest rates after Federal Reserve Chair Jerome Powell indicated the possibility of further rate hikes later this year. His remarks led to a strengthening of the dollar, which continued to influence market sentiment.

The economic readings from China also held great significance as they were expected to provide valuable insights into the current state of crude markets. As the world’s largest oil importer grapples with a sluggish post-COVID economic rebound, the outcome of these readings is eagerly anticipated.

In addition to the economic data, all eyes are on the upcoming meeting of the OPEC. The market eagerly awaits any potential decisions or announcements from OPEC, especially after the cartel implemented surprise production cuts earlier this year to support oil prices.

As for the United States, a revised reading on the first-quarter gross domestic product (GDP) growth is set to offer further cues on the performance of the world’s largest economy. Cooling economic growth puts pressure on the Federal Reserve to limit further interest rate hikes. However, the bank has indicated its willingness to take risks in the face of short-term economic headwinds to curb high inflation.

Furthermore, a reading on the personal consumption expenditures price index, which is the Fed’s preferred inflation gauge, is due to be released on Friday. It is expected to show that inflation remained persistent throughout May.

Rising interest rates have raised concerns about the potential slowdown in economic growth, which, in turn, could impact oil demand.

Meanwhile, oil markets are also eagerly awaiting key purchasing managers’ index (PMI) data from China on Friday, as it will provide further insights into the country’s economic activity. The PMI readings for both the manufacturing and services sectors are anticipated to reflect a contraction and a slowdown, respectively, as the post-COVID economic rebound loses steam.

Despite stimulus measures implemented by the Chinese government, including recent interest rate cuts, they have yet to significantly bolster economic growth.