Oil steady as inflation worry subdues summer demand optimism
Investors are cautious ahead of US consumer price data even as expected summer demand increases supports the market
25 June 2024 - 08:20
byEmily Chow
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Singapore — Oil prices were little changed on Tuesday after rising in the previous session as investors were cautious ahead of US consumer price data even as expected summer demand increases supported the market.
Brent futures for August settlement rose 5c to $86.06 a barrel at 4.40am GMT after gaining 0.9% in trading on Monday.
US crude futures for August delivery was up 6c to $81.69 a barrel after climbing 1.1% previously.
Both benchmarks rose about 3% last week, marking two consecutive weeks of gains.
Petrol demand is rising and oil and fuel stockpiles have declined as the US, the world’s biggest oil consumer, enters the peak summer consumption period.
US crude oil stockpiles are expected to have fallen by 3-million barrels in the week to June 21, a preliminary Reuters poll showed on Monday. Petrol stocks were also expected to have declined, while distillate inventories likely rose last week.
“The surge in oil prices was triggered by an optimistic demand outlook and reduced US inventories. With the northern hemisphere entering a hot summer and the upcoming hurricane season, demand is expected to continue increasing in the coming months,” said independent market analyst Tina Teng.
Still, investors are cautious about further oil price increases on concerns that relatively higher interest rates will limit growth in fuel consumption by curtailing the economy.
With the US Federal Reserve still focused on limiting inflation, the release of the personal consumption expenditures (PCE) index, the Fed’s preferred measure of price gains, on Friday will give more direction on rates.
Delays to an interest rate cut would keep the cost of borrowing higher for longer. “The PCE data from the US is a focus this week as it will provide clues about the Fed’s rate decision,” said Teng.
Oil was also supported by continued Ukrainian attacks on Russian oil infrastructure that could cut crude and fuel supply.
Most recently, on June 21, Ukrainian drones hit four refineries, including the Ilsky refinery, one of the main fuel producers in southern Russia.
The EU adopted a package of sanctions against Russia over its war in Ukraine that will see 27 vessels, including ones run by Russian state-owned shipping firm Sovcomflot, added to its list of sanctioned entities.
“Adding to this, the market remains on edge ahead of elections in Iran later this week. A more hard-line president could result in more direct confrontations with the US, Israel and Saudi Arabia,” said ANZ Research analysts in a note.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Oil steady as inflation worry subdues summer demand optimism
Investors are cautious ahead of US consumer price data even as expected summer demand increases supports the market
Singapore — Oil prices were little changed on Tuesday after rising in the previous session as investors were cautious ahead of US consumer price data even as expected summer demand increases supported the market.
Brent futures for August settlement rose 5c to $86.06 a barrel at 4.40am GMT after gaining 0.9% in trading on Monday.
US crude futures for August delivery was up 6c to $81.69 a barrel after climbing 1.1% previously.
Both benchmarks rose about 3% last week, marking two consecutive weeks of gains.
Petrol demand is rising and oil and fuel stockpiles have declined as the US, the world’s biggest oil consumer, enters the peak summer consumption period.
US crude oil stockpiles are expected to have fallen by 3-million barrels in the week to June 21, a preliminary Reuters poll showed on Monday. Petrol stocks were also expected to have declined, while distillate inventories likely rose last week.
“The surge in oil prices was triggered by an optimistic demand outlook and reduced US inventories. With the northern hemisphere entering a hot summer and the upcoming hurricane season, demand is expected to continue increasing in the coming months,” said independent market analyst Tina Teng.
Still, investors are cautious about further oil price increases on concerns that relatively higher interest rates will limit growth in fuel consumption by curtailing the economy.
With the US Federal Reserve still focused on limiting inflation, the release of the personal consumption expenditures (PCE) index, the Fed’s preferred measure of price gains, on Friday will give more direction on rates.
Delays to an interest rate cut would keep the cost of borrowing higher for longer. “The PCE data from the US is a focus this week as it will provide clues about the Fed’s rate decision,” said Teng.
Oil was also supported by continued Ukrainian attacks on Russian oil infrastructure that could cut crude and fuel supply.
Most recently, on June 21, Ukrainian drones hit four refineries, including the Ilsky refinery, one of the main fuel producers in southern Russia.
The EU adopted a package of sanctions against Russia over its war in Ukraine that will see 27 vessels, including ones run by Russian state-owned shipping firm Sovcomflot, added to its list of sanctioned entities.
“Adding to this, the market remains on edge ahead of elections in Iran later this week. A more hard-line president could result in more direct confrontations with the US, Israel and Saudi Arabia,” said ANZ Research analysts in a note.
Reuters
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