Oil Steady as Investors Await Fed Meeting and Inflation Data

LONDON: Oil prices were largely steady on Tuesday as investors waited for U.S. and China inflation data and the outcome of the Federal Reserve’s policy meeting to see how changing prices could hit demand.

Brent crude futures rose 4 cents, or 0.1%, to $81.67 a barrel by 1313 GMT, continuing a sharp recovery since closing at $77.52 a week earlier. That close, the lowest since February, was on the back of concerns about oversupply and low demand through the rest of 2024.

U.S. West Texas Intermediate (WTI) crude futures slipped 5 cents, or 0.1%, to $77.69.

Prices had climbed about 3% to a one-week high on Monday, buoyed by expectations that the Northern Hemisphere summer vacation season will boost fuel demand.

Some analysts said that any gain was likely to be short-lived given the prospect of higher interest rates remaining to combat stronger than desired inflation.

The release of U.S. consumer prices data for May and the conclusion of the Fed’s two-day policy meeting are both scheduled for Wednesday.

US crude output rises in March

“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,” IG market strategist Yeap Jun Rong said.

The Organization of the Petroleum Exporting Countries (OPEC) on Tuesday stuck to its forecast for relatively strong growth in global oil demand in 2024, despite lower than expected use in the first quarter, saying travel and tourism would support consumption in the second half.

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,” said OANDA analyst Kelvin Wong.

Wong said that if China’s Producer Price Index falls by 2% or more year on year, it would suggest that the deflationary risk spiral remains entrenched in China, which could result in lower demand for oil.

Deflation can stifle spending as businesses and consumers delay purchases in expectation that prices will fall, hitting economic activity and dampening oil demand.

Meanwhile, Saudi crude exports to China fell for a third straight month, pressuring prices further.

The U.S. could hasten the rate at which it replenishes the Strategic Petroleum Reserve, Energy Secretary Jennifer Granholm told Reuters last week. It wants to buy back oil at about $79 a barrel.