Oil Prices Steady as Market Awaits Inflation Data for Federal Reserve’s Interest Rate Hike Policy

Oil prices have steadied as the market awaits the U.S. inflation data that will likely influence the Federal Reserve’s policy on interest rate hikes.

Brent crude oil gained 14 cents to $85.75 a barrel, while U.S. West Texas Intermediate rose 10 cents to $81.63 a barrel.

The optimism surrounding the U.S. Federal Reserve’s cycle of interest rate hikes ending is driving the rise in oil prices, making dollar-priced oil cheaper for buyers holding other currencies.

This optimism is supported by comments from Philadelphia Federal Reserve Bank President Patrick Harker and Minneapolis Federal Reserve Bank President Neel Kashkari, who believe that the central bank may soon be done raising interest rates and that inflation will decrease by the end of the year.

However, traders remain wary of the potential for inflation data to come in on the hotter side of expectations, which could lead to a more circumspect market sentiment ahead of key macro data this week.

The U.S. 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.

The oil market also awaits clarity on oil demand and supply, with monthly reports from the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency due on Thursday and Friday, respectively.

The U.S. Energy Information Administration has already cut its forecast for oil production by OPEC countries by 0.5 million barrels-per-day for the rest of 2023 and cut its 2023 world oil demand growth forecast by 40,000 bpd.

Meanwhile, data from the American Petroleum Institute (API) showed that crude inventories rose by about 380,000 barrels in the week ended April 7, against forecasts from eight analysts polled by Reuters for a decline of 600,000 barrels. Gasoline inventories rose by about 450,000 barrels, while analysts had expected a 1.6 million-barrel drawdown.

The oil market is experiencing mixed sentiments due to the conflicting reports on demand and supply and the inflation data that could influence the Federal Reserve’s policy on interest rate hikes. The market will closely monitor the macro data releases and monthly reports from OPEC and the International Energy Agency for further clarity.