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Oil wobbles as market waits on Powell

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2023-06-20

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Global oil prices wobbled lower in Asian trading in a holiday-shortened Monday session with traders waiting for two separate appearances by Fed chair Jay Powell later this week.

Before Powell speaks, China is expected to cut its remaining key interest rates by 0.10 per cent and perhaps reveal more details of stimulus plans later in the week.

The International Energy Agency is still bullish about rising demand for oil from China this year, despite the weak performance of the economy in the past four months as exports and imports have weakened.

But markets want to see what Powell says and assess any impact his comments may have on the value of the US dollar, US rates and prospects for a firming in demand for oil over the rest of 2023.

Powell appears before the US Congress on Wednesday and Thursday while several senior members of the Fed are due to make speeches in the next four days.

In Europe, the Bank of England rate decision is the big event -- a 0.25 per cent rise will take the central bank's rate to 4.75 per cent. Moody’s economists forecast the bank will make one more increase and then sit for more than a year.

But no one thinks the UK central bank’s rate rise will impact global thinking on rates and inflation.

West Texas Intermediate (WTI) crude futures dipped 1.3 per cent to just over US 79 cents a barrel in Asia on Monday, while Brent futures eased 1.2 per cent to US$75.73 a barrel.

That was after WTI rose 1.56 per cent last week and Brent oil was up 1.63 per cent.

Monday trading saw no reaction to the news that US energy firms last week cut the number of operating oil and natural gas rigs for a seventh week in a row for the first time in nearly three years last week.

Energy services firm Baker Hughes said in its weekly report on Friday that the oil and gas rig count fell by 8 to 687 in the week to June 16, the lowest since April 2022.

Baker Hughes said that puts the total count down by 53 rigs, or 7 per cent, over this time last year in a move that continues to be a bullish signal for oil prices later this year if demand strengthens, especially in China.

US oil rigs fell by 4 to 552 last week, the lowest since April 2022, while gas rigs fell 5 to 130, their lowest since March 2022.

Two shale regions each lost four rigs, the Permian in Texas and New Mexico, the nation's biggest oil basin, and the Marcellus in Pennsylvania, West Virginia and Ohio, the nation's biggest gas basin.

The rig count fell to 342 in the Permian, its lowest since September 2022, and 35 in the Marcellus, its lowest since March 2023, according to Baker Hughes.

Comex gold traded lower in Asia as well, dipping to around $US1.966 an ounce, a loss of 0.23 per cent.

Gold traders are also awaiting Powell’s comments on Wednesday and Thursday in Washington.

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