By Peter Nurse
Investing.com -- Oil prices struggled for direction on Tuesday, as traders assessed optimism over China’s recovery, future Federal Reserve interest rate hikes and uncertain global supply.
The crude market has struggled over the last week on fears that sticky inflation in the U.S., including producer prices rising the most since June, would prompt the Federal Reserve to continue lifting interest rates for longer than previously expected.
Higher rates are expected to weigh heavily on economic growth, and in turn, hurt crude demand this year.
This has offset optimism over a recovery in Chinese demand this year, as the second largest economy in the world ended its severe anti-COVID mobility restrictions.
China is forecast to drive crude demand to record highs this year, with the largest importer of crude set to register almost around half of the demand growth expected this year, according to both the Organization of Petroleum Exporting Countries and the International Energy Agency
Any increase in China’s purchases of crude is likely to come from Russia, with data released Tuesday showing Russia's seaborne crude exports jumped 26% last week, with the country exporting 3.6 million barrels a day from its ports in the seven days through Friday.
Additionally, Global Witness reported on Monday that Shell (LON: SHEL ) and Vitol – neither of which commented on the story – have sharply increased imports of fuel into Europe from Turkish refineries that have in turn increased their offtake of Russian crude.
Russia, the world's third-largest producer, announced earlier this month that it would cut its March output by 500,000 barrels a day.
This cut in global supply comes on top of the decision by OPEC+ late last year that it would cut oil production targets by 2 million barrels per day until the end of 2023.
Oil prices were impacted last week by substantially higher-than-expected U.S. inventory builds, while the Biden administration also announced the sale of 26 million barrels of crude from the Strategic Petroleum Reserve.
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