June 11 2024: Oil prices remained stable on Tuesday as investors awaited key U.S. and China CPI data and the outcome of the Federal Reserve’s policy meeting to better understand the future direction of inflation and its impact on fuel demand.
By 0817 GMT, Brent crude futures had fallen by 5 cents, or 0.06%, to $81.58 per barrel, while U.S. West Texas Intermediate crude futures slipped by 1 cent, or 0.01%, to $77.73 per barrel.
Prices had risen about 3% to a one-week high on Monday, driven by expectations that the Northern Hemisphere summer vacation season would boost fuel demand. However, some analysts believe this gain might be short-lived due to the prospect of higher interest rates.
The release of U.S. consumer price index (CPI) data for May and the conclusion of the Fed’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,” said 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,” said 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 suggests that the deflationary risk spiral remains entrenched in China which in turn may likely see less demand for oil,” he added, noting that a ‘disappointing’ figure would be at minus 2% year-on-year or much lower.
Meanwhile, Saudi crude exports to China falling for a third straight month also added pressure on prices.
Higher refinery margins were helping to support oil prices, as was the potential that the United States could increase crude purchases for its petroleum reserve, some analysts said.
Profit margins for a typical Singapore refinery processing Dubai crude have averaged around $4 a barrel in the past three trading sessions, up from a May average of $2.56 a barrel, according to LSEG pricing data.
The possibility that if WTI stays below $79, the U.S. will move to build up its strategic reserves, provided support for oil prices, said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities.
The U.S. could expedite the replenishment of the Strategic Petroleum Reserve as maintenance on the stockpile is completed by the end of the year, Energy Secretary Jennifer Granholm told Reuters last week. The U.S. aims to buy back oil at around $79 a barrel.
4o
