Oil Prices Rise by 1% Ahead of Key Inflation Data.
Oil Prices Bounce Back After a Downbeat Week Amid Market Anticipation of Inflation Data and Interest Rate Decisions
In a modest trading session influenced by public holidays in Britain and the United States, oil prices rose by over 1% on Monday. This recovery follows a challenging week marked by concerns over U.S. interest rate hikes amid persistent inflation.
The Brent crude July contract settled $1, or 1.2%, higher at $83.12 a barrel. Meanwhile, the more actively traded August contract rose $1.04 to $82.88. U.S. West Texas Intermediate (WTI) crude futures also saw gains, up 93 cents at $78.65 per barrel.
Last week, Brent lost about 2% and WTI nearly 3% after the minutes from the Federal Reserve indicated that some officials might support further interest rate increases if necessary to control inflation. This cautious sentiment has kept investors on edge.
“Sentiment in the oil complex has been skittish as investors are constantly recalibrating expectations for the Federal Reserve’s monetary policy trajectory,” said Vandana Hari, founder of oil market analysis provider Vanda Insights.
Recent economic data from Western economies has led to varied expectations regarding rate cuts, depending on the region. On Monday, European Central Bank (ECB) policymakers suggested that while the bank has room to cut interest rates as inflation slows, it should proceed cautiously.
Inflation data for the eurozone, expected to show a slight increase to 2.5%, is due on Friday. Economists believe this should not prevent the ECB from easing policy next week. Meanwhile, the U.S. personal consumption expenditures (PCE) index, due on May 31, will be closely monitored as it is the Federal Reserve’s preferred inflation measure.
Additionally, German inflation data scheduled for Wednesday and broader eurozone readings on Friday will be scrutinized for indications of a potential European rate cut, which traders have penciled in for next week.
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The upcoming OPEC+ meeting on June 2 is another focal point for the market. The group, which includes the Organization of the Petroleum Exporting Countries (OPEC) and allies like Russia, is expected to extend output cuts of 2.2 million barrels per day.
In a related development, Goldman Sachs has revised its global oil demand forecast for 2030, now expecting consumption to peak by 2034 due to a potential slowdown in electric vehicle adoption. This forecast suggests that refineries will continue operating at higher-than-average rates through the end of the decade.
Overall, oil markets remain in a state of flux, driven by ongoing economic indicators and policy decisions that will shape the future of global oil demand and supply dynamics.
