Oil prices remained largely unchanged on Tuesday as investors adopted a cautious stance while awaiting key U.S. and China Consumer Price Index (CPI) data, along with the outcome of the Federal Reserve’s policy meeting. These factors are expected to provide insights into the trajectory of inflation and its potential impact on fuel demand.
Brent crude futures dipped by 5 cents, or 0.06%, to $81.58 per barrel by 0817 GMT, while U.S. West Texas Intermediate crude futures slipped by 1 cent, or 0.01%, to $77.73.
The modest movement followed a 3% climb to a one-week high on Monday, primarily driven by optimism surrounding increased fuel demand during the Northern Hemisphere summer vacation season. However, analysts cautioned that this uptick might be short-lived due to looming prospects of higher interest rates.
Market participants eagerly anticipated the release of U.S. consumer price index data for May and the conclusion of the Federal Reserve’s two-day policy meeting, both scheduled for Wednesday.
Yeap Jun Rong, IG market strategist, highlighted the need for more conviction in oil prices to sustain a recovery, particularly above the $83.00 level, considering the prevailing downside trend since April.
Traders also exercised caution ahead of China’s macroeconomic data release on Wednesday, particularly focusing on inflation figures. OANDA senior market analyst Kelvin Wong emphasized that disappointing Producer Price Index (PPI) numbers could signify persistent deflationary risks in China, potentially impacting oil demand negatively.
Additionally, ongoing declines in Saudi crude exports to China for the third consecutive month exerted further pressure on prices.
Despite these factors, higher refinery margins and prospects of increased crude purchases by the United States for its petroleum reserve provided some support to oil prices.
In conclusion, while oil prices maintained stability, investors remained vigilant for cues from upcoming economic data releases and the Fed’s policy decision to gauge the future trajectory of fuel demand amidst inflationary pressures.
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