Oil Prices Hold Steady Amidst Awaited Economic Data and Fed Meeting

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Oil prices remained relatively stable on Tuesday as investors awaited crucial U.S. and China consumer price index (CPI) data, alongside the outcome of the Federal Reserve’s policy meeting. These key indicators are expected to provide insights into the trajectory of inflation and its potential impact on fuel demand.

Brent crude futures experienced a slight decline of 5 cents, amounting to 0.06%, settling at $81.58 per barrel by 0817 GMT, while U.S. West Texas Intermediate crude futures slipped 1 cent, or 0.01%, to $77.73.

Monday saw prices climbing approximately 3% to reach a one-week high, driven by expectations of increased fuel demand during the Northern Hemisphere’s summer vacation season. However, analysts caution that this uptick may be short-lived, particularly with the looming possibility of higher interest rates.

IG market strategist Yeap Jun Rong emphasized the need for more conviction in oil prices to sustain a recovery, noting that while recent gains have been encouraging, the broader trend since April still leans towards the downside.

Ahead of Wednesday’s release of U.S. CPI data and the conclusion of the Fed’s policy meeting, traders are exercising caution. The outcome of these events will likely influence market sentiment and future price movements. Additionally, anticipation surrounds the release of macroeconomic data from China, particularly the inflation figures, which could impact oil demand dynamics.

Kelvin Wong, senior market analyst at OANDA, highlighted the significance of China’s inflation data, suggesting that any deviation from consensus estimates could signal underlying economic trends and affect oil demand accordingly.

Amidst these factors, Saudi Arabia’s declining crude exports to China for a third consecutive month and higher refinery margins have also influenced market sentiment. Analysts suggest that the potential increase in U.S. crude purchases for its strategic petroleum reserve, particularly if WTI prices remain below $79, could further support oil prices.

Overall, market participants are closely monitoring economic data releases and geopolitical developments for cues on future oil price movements.