Oil prices dipped on Tuesday as the market remained cautious ahead of April U.S. inflation numbers, which will influence the Fed’s next interest rate decision.
At 0340 GMT, Brent crude traded at $76.71 and WTI at $72.90, down 30 and 26 cents, respectively.
Both futures ended the previous trading session up over 2%.
“Oil prices have rebounded somewhat in the last two sessions, so now is time for a pause… with no real positive data coming out,” said DBS Bank head energy analyst Suvro Sarkar.
“The market is cautious today ahead of inflation data…. Over the previous two weeks, net long holdings have fallen substantially, driving traders out of the market and lowering volumes.” Wednesday brings April U.S. CPI data.
The Fed hiked rates last week in what may be its last tightening cycle. With inflationary pressure easing, it removed guidance for future rises.
On Monday, the New York Federal Reserve reported that U.S. consumers last month predicted significantly lower inflation in a year.
While oil markets fell substantially last week, prices rebounded on Friday and Monday as fears of recession lessened in the U.S., the world’s biggest oil user. As a result, some traders assessed crude’s three-week slump on demand issues as overblown.
“The oil market was extremely oversold and it will probably continue to stabilise as long as Wall Street is still confident the Fed will cut rates later this year,” OANDA senior market analyst Edward Moya said.
OPEC+ countries begin voluntary output restrictions this month, and the group meets again on June 4.
“Oil prices won’t be able to rise that much from here given all the growth demand fears, but expectations are high for OPEC+ to try to keep prices above the $70 a barrel level,” Moya said.
Over the weekend, Alberta declared a state of emergency due to wildfires that have displaced almost 30,000 people and forced energy firms to shut in at least 280,000 barrels of oil equivalent per day, more than 3% of Canada’s output, bolstering oil prices.
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