Oil fell on concern that Chinese stimulus may undershoot expectations, and as investors prepared for commentary from the head of the Federal Reserve that may flag further monetary tightening.

West Texas Intermediate for August delivery declined below $71 a barrel in early Asian trading after falling on Tuesday as investors turned away from risk assets and the dollar strengthened. While China has taken incremental steps in recent days to aid growth, there is concern its moves may lack punch.

Fed Chair Jerome Powell is scheduled to give his semi-annual report to Congress on Wednesday. While policymakers kept interest rates unchanged at their meeting last week, they forecast further rises in the second half to help bring still-elevated inflation back toward their target.

Oil has dropped this half as China’s reemergence from its strict Covid Zero policies failed to gain traction and global crude supplies, including from Russia, proved abundant. In response, the Organization of Petroleum Exporting Countries and its allies have announced supply cuts, including a voluntary reduction by cartel leader Saudi Arabia that will take effect in July.

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Author: Jake Lloyd-Smith