Crude oil traded lower on Monday morning as China’s GDP (gross domestic product) forecast for 2023 was below market expectations.
At 9.55 am on Monday, May Brent oil futures were down by 0.76 per cent at $85.18 and April crude oil futures on WTI were down by 0.77 per cent at $79.07.
March crude oil futures were trading at ₹6,472 on the Multi Commodity Exchange (MCX) during initial trading against the previous close of ₹6,503, down by 0.48 per cent, and April futures were trading at ₹6,505 against the previous close of ₹6,532, down by 0.41 per cent.
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Factors to lower expectations
In the work report tabled during the annual session of the National People’s Congress (NPC) of China on Sunday, Li Keqiang, Prime Minister of China, announced that the economic growth target has been set at 5 per cent for 2023. This was below the target of 5.5 per cent for 2022.
In 2022, China’s GDP grew by 3 per cent due to factors, such as three years of Covid-related restrictions and a crisis in the property sector. Other factors, such as a crackdown on some private enterprises and the decline in demand for Chinese exports also added to this.
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Being a major consumer of crude oil in the world market, any reduction in growth targets impacts the price of crude oil in the international market.
Apart from the Chinese growth target, expectations of interest rate hikes by different economies across the world also impacted the price of the commodity.
Jerome Powell, Chair of the US Federal Reserve, will testify to Congress on Tuesday and Wednesday. Congress is likely to focus on whether larger interest rate hikes are needed in the US, which happens to be one of the major consumers of crude oil in the world market. Fed Reserve has been resorting to interest rate hikes to control inflation in that country. Aggressive interest rate hikes impacts the demand for commodities such as crude oil.
To bring inflation under control, the President of the European Central Bank, Christine Lagarde, had also recently hinted at increasing interest rates during March.
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March natural gas futures were trading at ₹223.90 on MCX in the initial trading hour of Monday morning against the previous close of ₹244.80, down by 8.54 per cent.
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On the National Commodities and Derivatives Exchange (NCDEX), March steel long contracts were trading at ₹49,720 against the previous close of ₹49,320, up by 0.81 per cent.
March jeera futures were trading at ₹30,090 on NCDEX against the previous close of ₹30,235, down by 0.48 per cent.
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