Oil treads water as market awaits key US inflation data

Oil prices were mostly steady on Wednesday as the market waited for US inflation data later in the day that will most likely influence the Federal Reserve’s policy on future interest rate hikes.

Brent crude edged up 3c to $85.64 a barrel as of 4.03am GMT, while US West Texas Intermediate dipped 2c to $81.51 a barrel.

Prices had risen about 2% on Tuesday amid optimism that the US Federal Reserve is getting closer to ending its cycle of interest rate hikes, making dollar-priced oil cheaper for buyers holding other currencies.

The US consumer price index is expected to show March core inflation rose 0.4% on a monthly basis and 5.6% year on year, according to a Reuters poll of economists.

Philadelphia Federal Reserve president Patrick Harker said on Tuesday that he felt the US central bank may soon be done raising interest rates, while Minneapolis Federal Reserve president Neel Kashkari said he believed inflation, now at a rate of 5% by the Fed’s preferred measure, will get to “the mid-threes” by the end of 2023.

Yeap Jun Rong, a market analyst at IG said in a note to clients, however, that any “higher-than-expected inflation print could lay the ground for another 25 basis-point rate hike in June”.

Meanwhile, data from the American Petroleum Institute (API) showed crude inventories rose by about 380,000 barrels in the week ended April 7, sources said, against forecasts from eight analysts polled by Reuters for a decline of 600,000 barrels.

At the same time, petrol inventories rose by about 450,000 barrels, according to the API report, while analysts had expected a 1.6 million-barrel drawdown.

The US government will release its stockpile data at 2.30pm GMT on Wednesday.

In another negative for oil demand, on Tuesday the International Monetary Fund (IMF) trimmed its 2023 global growth outlook, citing the effect of higher interest rates.

In addition to the inflation data, the market is waiting for more clarity on oil demand and supply with monthly reports from oil cartel Opec and the International Energy Agency due on Thursday and Friday respectively.

The US Energy Information Administration on Tuesday cut its forecast for oil production by Opec countries by 500,000 barrels per day for the rest of 2023 and cut its 2023 world oil demand growth forecast by 40,000 bpd.

Reuters