Crude drop on Chinese outlook and possible rate hikes

By Noah Browning

LONDON, March 6 (Reuters) – Crude prices fell on Monday after China targeted economic growth for this year of around 5%, below expectations, and as investors cautiously awaited testimony from the president of the US Federal Reserve, Jerome Powell, this week.

* As of 10:00 GMT, Brent crude futures were down 71 cents, or 0.8%, at $85.12 a barrel, while West Texas Intermediate (WTI) futures US were down 59 cents, or 0.7%, at $79.09.

* “Crude remains in a tussle between optimism over China’s reopening and nervousness over a hawkish Fed hurting the US economy,” said Vandana Hari of research firm Vanda Insights.

* China’s growth outlook, announced on Sunday, fell short of its gross domestic product (GDP) growth target of 5.5% last year. GDP grew only 3% last year. Political sources had told Reuters that a range of up to 6% could be set by 2023.

* Oil prices are likely to be affected by interest rate hikes around the world, as global central banks tighten policy over fears of accelerating inflation. Traders have started pricing in rate hikes, but expect them to be lower than last year.

* Fed Chairman Jerome Powell will testify before Congress on Tuesday and Wednesday, where he is likely to be asked about the need for further increases in the biggest oil-consuming country.

* Future rate hikes in the US will also likely depend on what the February payrolls report reveals on Friday, followed by the February inflation report due next week.

(Additional reporting by Mohi Narayan in New Delhi and Sudarshan Varadhan in Singapore; editing in Spanish by Carlos Serrano)