Oil prices took a step back on Tuesday, losing some of the momentum from the previous two sessions as the market braced itself for the release of the U.S. inflation figures. The outcome of the data will have a significant impact on the Federal Reserve’s next interest rate decision.
Brent crude oil, the international benchmark for Nigerian oil, fell by 0.9%, or 68 cents to $76.33 while U.S. West Texas Intermediate (WTI) crude oil lost 0.9%, or 69 cents to trade at $72.47.
The previous two sessions had seen both oils settle more than 2% higher. However, many traders are playing it safe, with net long positions declining sharply over the last couple of weeks, and volumes have dropped as a result. Suvro Sarkar, the lead energy analyst at DBS Bank, said that many traders are already out of the market ahead of the inflation data.
U.S. consumer price index (CPI) figures for April are due to be released on Wednesday, with the Fed watching the outcome closely. The Fed had raised rates last week in what could be the final hike of its tightening cycle. It dropped guidance about the need for future hikes, with inflationary pressure starting to ease.
The New York Federal Reserve’s report showed that U.S. consumers expect slightly lower inflation in a year’s time.
While the oil markets fell sharply last week, prices rose on Friday and Monday as fears of recession eased in the U.S. Energy producers in Canada have been affected by wildfires, with the Canadian province of Alberta declaring a state of emergency over the weekend.
Nearly 30,000 people have been displaced, and at least 280,000 barrels of oil equivalent per day have been shut down, which is more than 3% of Canada’s output.
Clifford Bennett, chief economist at ACY Securities, said that while continued moderation of U.S. inflation is expected, the Federal Reserve remains highly focused on defeating sustained high inflation at any level.
