Investing.com -- Oil prices slipped Tuesday on increased concerns that continued aggressive monetary tightening will hit global economic activity as the year progresses, and thus the demand for crude.
By 08:40 ET (12:40 GMT), U.S. crude futures traded 1.1% lower at $68.62 a barrel, while the Brent contract fell 1% to $73.61 a barrel.
Chinese growth optimism
The crude market had opened with healthy gains Tuesday after Chinese Premier Li Qiang had effectively promised more stimulus to ensure that the Asian giant, and world’s largest crude importer, reached its annual economic growth target of around 5%.
China's GDP grew 4.5% year-on-year in the first three months of the year, but momentum has faded sharply since, prompting many senior banks to downgrade their growth estimates.
“Up until now, oil demand indicators for China have been good, with stronger crude oil imports and higher apparent domestic demand,” said analysts at ING, in a note. “The concern is whether this can continue as there are clearly still some weak spots within the Chinese economy – specifically with industrial production and the property sector.”
Western monetary tightening to continue
However, these gains were swiftly sold into after European Central Bank President Christine Lagarde, hosting a gathering of global central bankers in Portugal, stated that eurozone inflation has entered a new phase which could linger for some time, suggesting a prolonged of restrictive monetary policies, hitting global demand.
This followed comments from Gita Gopinath, the International Monetary Fund’s deputy managing director, who stated that “central banks, including the ECB, must remain committed to fighting inflation despite risks of weaker economic growth.”
Back in the U.S., the largest consumer of energy in the world, Morgan Stanley added a 25-basis-point rate hike in July to its Fed policy forecast, saying the bar for such a move "is significantly lower than we had initially expected."
U.S. inventories due
Next up will be U.S. inventory data from the American Petroleum Institute industry group, followed by the official government data on Wednesday.
The API reported a fall in crude stocks of just over a million barrels last week, and a Reuters poll indicated U.S. inventories also probably fell in the week to June 23.
The weekend’s mutiny in Russia by the Wagner Group of mercenaries has largely been shrugged off by the market, despite the potential for a disruption in supply from one of the world’s major oil producers, as Russian oil loadings have kept on schedule.
That said, data collated by Bloomberg suggested that Russia’s seaborne crude oil flows to international markets slumped last week, by around 980,000 barrels a day in the week to June 25, with maintenance work, rather than output cuts, the most likely cause.