Oil prices dropped nearly 2% in early Asia trade on Monday as investors braced for additional rate cuts from China and kept an eye on U.S. monetary policy ahead of this week’s hearing from Federal Reserve Chair Jerome Powell.
Brent crude lost US$1.20 or 1.57% to trade at US$75.41 a barrel by 10.21 A.M. Bangkok time, while US West Texas Intermediate (WTI) crude was down US$1.15 or 1.60% to US$70.63.
China’s refineries processed their biggest volume of crude in years through May, but concerns remain over a stalling economic rebound, which might limit fuel consumption and lower crude demand.
Goldman Sachs has joined other world’ top investment banks to downgrade its annual growth projection for China, citing concerns that the stimulus measures already in place in the world’s largest oil importer may not be enough to sustain a recovery.
Markets also eye on Fed Chair Jerome Powell’s testimony before Congress on Wednesday for more hints about the direction of U.S. monetary policy.
In its ongoing fight against inflation, the Federal Reserve left interest rates unchanged last week but suggested two more hikes could be coming later this year. Oil prices dropped as investors worried about the impact of higher interest rates in the US on the economy and demand.