Fears of Rising Rates and Worsening Growth Push Oil Prices Near 5-Week Low.

• Oil prices are once again under pressure as concerns over rising interest rates and slowing economic growth dent expectations for a recovery in demand this year. Brent oil futures fell 0.6% to $80.97 a barrel, while West Texas Intermediate crude futures fell 0.6% to 77.39 a barrel by 21:46 ET (01:46 GMT). Both contracts lost about 5% last week, marking their first weekly loss in five weeks.
• Mixed signals on global manufacturing activity further unsettled markets, with readings from the UK and eurozone showing a sustained decline. While U.S. manufacturing activity grew more than expected in April, analysts warned that this could likely feed into inflation.
• Concerns over more U.S. interest rate hikes also weighed heavily on oil markets, as the dollar recovered some lost ground and uncertainty persisted over when the Federal Reserve will pause its rate hike cycle. Investors are worried that higher interest rates will lead to slower economic growth, which would in turn hurt oil demand.
• The recent boost in oil prices from an unexpected production cut by the Organization of Petroleum Exporting Countries and allies (OPEC+) now appears to have largely worn off, with oil prices having reversed a bulk of their gains in recent weeks. While supply is set to tighten as the OPEC+ cuts take hold in May, markets fear that worsening demand will result in less tight than expected conditions.
• A swathe of weaker-than-expected U.S. corporate earnings also furthered this notion, reflecting the impact of high-interest rates on business activity. Focus this week is on U.S. and European GDP data for the first quarter of 2023, which is expected to show that growth slowed from the prior quarter.
• The first week of May will also see a string of central bank rate decisions, with the Federal Reserve and European Central Bank both expected to hike rates further to combat inflation. This trend is expected to result in slowing economic growth this year, potentially denting crude demand despite a recovery in major importer China.
• Recent data showed that the country imported record amounts of crude in March, as it reopens after three years of COVID lockdowns. However, even China’s strong demand may not be enough to offset the impact of rising interest rates and slowing economic growth on global crude demand.
• Oil markets are also being closely watched for any signs of a potential return of Iranian crude to the market, which could further weigh on prices. The country has been in talks with the United States to revive the 2015 nuclear deal, which would lead to the lifting of sanctions and the return of Iranian oil exports.
• While a deal is still uncertain, any signs of progress could put additional pressure on oil prices. Investors will also be closely watching the ongoing COVID-19 pandemic and its impact on global crude demand.