Oil prices fell on Tuesday, after U.S. data suggested inflation remains sticky and OPEC maintained its demand forecast for the year.
Brent crude futures fell $1.08 to $82.28 a barrel at 11:31 a.m. ET (1531 GMT), while U.S. West Texas Intermediate crude futures (WTI) lost $1.17 to $77.95 a barrel.
U.S. producer prices increased more than expected in April amid strong gains in the costs of services and goods, indicating that inflation remained elevated early in the second quarter.
Borrowing costs in the U.S. have been stuck at high levels since last July as the government aims to quash sticky inflation.
Federal Reserve Chair Jerome Powell said he expects U.S. inflation to continue declining through 2024 but warned his confidence in those decreases has fallen after prices rose more quickly than expected through the first quarter.
“I expect that inflation will move back down … on a monthly basis to levels that were more like the lower readings that we were having last year”, Powell said at a banking event in Amsterdam, adding, “I would say my confidence in that is not as high as it was.”
“The inflation story is not under control that is pulling demand back a bit and the thing that rubbed a little salt in the wound was Powell’s comments”, said Tim Snyder, economist at Matador Economics.
U.S. consumer price data, expected on Wednesday, will have a sharper impact on the timing of the much-awaited rate cut, which could spur economic growth and therefore oil demand.
Meanwhile on Tuesday, the Organization of the Petroleum Exporting Countries stuck to its forecast for relatively strong growth in global oil demand in 2024 and said there was a chance the world economy could do better than expected this year.
OPEC’s monthly report said world oil demand will rise by 2.25 million barrels per day (bpd) in 2024 and by 1.85 million bpd in 2025.
Energy markets were also watching wildfires in remote western Canada that could disrupt the country’s oil supply.
Firefighters on Monday were racing to contain one blaze in British Columbia and two in Alberta near the heart of the country’s oil sands industry.
“Spreading wildfires in Alberta oil sands impose downside risks to our constructive Canada production outlook as massive fires in the same region eight years ago triggered a temporary shutdown of over 1 million bpd oil production,” said Goldman Sachs analysts in a note.
Although no operational disruptions have been reported, Canada’s 3.3 million barrel per day (bpd) production capacity was “very likely to be affected,” said Alex Hodes, an analyst at energy brokerage StoneX. (Reporting by Georgina McCartney in Houston; Paul Carsten and Natalie Grover in London and Jeslyn Lerh in Singapore; Additional reporting by Colleen Howe in Beijing; Editing by Marguerita Choy, Alexandra Hudson)
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Published: 14 May 2024, 10:39 PM IST
