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Oil prices down ahead of Jerome Powell’s hearing

The current situation of the oil market in decline is influenced by various factors such as the more tepid than expected Chinese economic recovery, the progress in the Iranian nuclear talks as well as the expectation of Jerome Powell's hearing.

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On Tuesday, March 7, 2023, oil prices saw a slight decline before Fed boss Jerome Powell’s hearing. This is due to the more tepid than expected economic recovery in China and the potential progress of the Iranian nuclear talks.

Real time figures

Around 10:30 GMT (11:15 a.m. in Paris), a barrel of North Sea Brent crude for May delivery lost 0.21% to $86.00. A barrel of U.S. West Texas Intermediate (WTI) for April delivery, meanwhile, gave up 0.17% to $80.32.

Waiting for Jerome Powell’s hearing

Investors eagerly awaited the appearance of Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), before the U.S. Congress the following Tuesday and Wednesday. They looked for any hint of the future of the institution’s monetary policy. Tighter monetary policy to combat inflation could give the greenback a further boost, and thus weigh on demand for oil that is traded in dollars, making it less attractive to buyers using other currencies.

The situation in China

On the Chinese demand side, “the increase in official Saudi crude oil sales prices to Asia for April was seen as a sign of immediate tension,” says Tamas Varga, analyst at PVM Energy. This means that Saudi Arabia expects consumption in China to increase. However, China’s “relatively tepid” 5% growth target announced on Sunday dampened investors’ hopes for a rapid economic recovery in China after the end of health restrictions. This growth target is indeed one of the most modest in decades.

The Iranian nuclear talks

Constructive talks between Iran and the International Atomic Energy Agency (IAEA) also weighed on prices, notes Tamas Varga. A positive outcome to the Iranian nuclear talks could lead to the lifting of some of the US sanctions against Iran and allow the country to return to full export capacity on the oil market. IAEA Director General Rafael Grossi said after returning from a trip to Tehran over the weekend that the Islamic Republic had agreed to reconnect surveillance cameras at several nuclear sites. “This decision is a step in the right direction, but it does not imply an immediate return of Iranian barrels to the oil market,” Varga said.

Despite these elements, experts remain cautious about the evolution of oil prices.

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