Economic data raise recession fears that lead to oil prices falling

Prices of oil fell on Monday, as investors pondered the possibility of an interest rate hike in May by the U.S. Federal Reserve, a move that could dampen hopes for an economic recovery, despite the fact that Chinese GDP data was expected to indicate that demand grew in the second quarter.

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As of 11415 GMT, Brent crude futures were down 30 cents or 0.3% to $86.01 a barrel, while U.S. West Texas Intermediate crude futures fell 34 cents or 0.4% to $82.18 a barrel.

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The two contracts registered their fourth weekly gain in a row last week, which is the longest span since mid-2020.

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"The price of crude futures continued to drift in the range as a fresh week began ... with the production cuts announced by OPEC and non-OPEC a fortnight ago fully incorporated,” Vandana Hari, CEO of oil market analysis provider Vanda Insights, noted.

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"There are ongoing signs in the oil industry that a U.S. economic slowdown is taking hold."

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There may also be clues in the earnings reported by U.S. companies that could help determine the Fed's future policy path and the dollar's movements.

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There has been a strengthening of the greenback alongside increases in interest rates, which has resulted in oil denominated in dollars becoming more expensive for holders of other currencies.

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Market participants believe that the Federal Reserve will increase its lending rate in May by another quarter percentage point, and have pushed out to the end of the year the expectation of a rate cut, as typically occurs when economic growth slows.

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It is expected that the release of China's first-quarter gross domestic product (GDP) data on Tuesday, at 0200 GMT, will be a positive one for commodity prices, as the International Energy Agency (IEA) forecasts that China's GDP growth will account for most of the growth in demand for commodities in 2023.

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There is also a warning by the IEA in its monthly report that output cuts announced by OPEC+ producers could exasperate the oil supply deficit expected in the second half of this year and this could negatively impact consumers and the global economic recovery.

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As supplies tighten further, oil exports from northern Iraq to Turkey's Ceyhan port have remained at a standstill almost three weeks after an arbitration ruling, which ruled that Ankara owed Baghdad compensation for exports that were not authorized, was overturned.