Oil lower as investors await key U.S., China CPI data

by Jonathan Adams
Oil rises

Brent crude futures dropped 13 cents, or 0.16%, to $81.50 per barrel and U.S. WTI crude futures slid 7 cents, or 0.04%, to $77.67

Oil prices traded lower on Tuesday, as investors waited for key U.S. and China CPI data as well as the outcome of the Fed’s policy meeting to get a clearer picture of where inflation is heading and how that will affect fuel demand.

Brent crude futures dropped 13 cents, or 0.16%, to $81.50 per barrel by 0613 GMT and U.S. WTI crude futures slid 7 cents, or 0.04%, to $77.67.

Prices had jumped around 3% to a one-week peak on Monday, buoyed by expectations that the Northern Hemisphere summer vacation season will boost fuel demand this summer, a gain some analysts said was likely to be shortlived given the prospect of higher interest rates remained.

The release of U.S. CPI data for May and the conclusion of the Federal Reserve’s two-day policy meeting are both scheduled for Wednesday.

More conviction may be needed in oil prices for a more sustained recovery with a move above the $83.00 level, given that the broader trend for oil prices still leans on the downside with a series of higher highs since April, according to IG market strategist Yeap Jun Rong.

Traders were also cautious ahead of the release of macroeconomic data from China on Wednesday.

The potential adverse macro driver for oil prices will be China’s inflation data that will be out tomorrow, according to OANDA senior market analyst Kelvin Wong.

The expected consensus estimates are looking for a further slowdown in the deflationary trend of China’s factory gate prices, but if the PPI numbers disappoint, it indicates that the deflationary risk spiral remains entrenched in China which in turn may likely see less demand of oil, he added, saying a ‘disappointing’ figure would be at -2% year-on-year or much below.

Meanwhile, Saudi crude exports to China for a third consecutive month also put further pressure on prices.

Higher refinery margins were helping to support oil prices, as was the potential that the US could boost crude purchases for its petroleum reserve, according to some analysts.

Profit margins for a typical Singapore refinery that processes Dubai crude have averaged nearly $4 a barrel in the last three trading sessions, up from May average of $2.56 a barrel, according to LSEG pricing data.

Disclaimer: The opinions expressed by our writers are their own and do not represent the views of Trading and Investment News. The information provided on Trading and Investment News is intended for informational purposes only. Trading and Investment News is not liable for any financial losses incurred. Conduct your own research by contacting financial experts before making any investment decisions.

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