Oil Climbs 1% Ahead of Inflation Data After Lackluster Week, Reports Reuters

By Arathy Somasekhar

HOUSTON (Reuters) – Oil prices increased by over 1% in quiet trading on account of public holidays in the UK and the US, following a lackluster week that was influenced by the outlook for US interest rates amid persistent inflation.

The July contract saw a rise of $1, or 1.2%, settling at $83.12 a barrel, while the more actively traded August contract rose by $1.04 to reach $82.88. Meanwhile, US West Texas Intermediate (WTI) crude futures climbed by 93 cents to $78.65.

Last week, Brent crude experienced a decline of approximately 2%, and WTI nearly fell by 3%, influenced by the Federal Reserve’s minutes indicating that some officials might consider additional interest rate hikes if necessary to manage ongoing inflation concerns.

"Sentiment in the oil market has been jittery as investors continually adjust their expectations regarding the Federal Reserve’s monetary policy," noted Vandana Hari, founder of an oil market analysis firm.

Recent economic data from Western nations has led to fluctuating expectations for interest rate cuts, varying by region. On Monday, significant figures from the European Central Bank (ECB) indicated that there is potential for interest rate reductions in light of slowing inflation, although policymakers emphasized a cautious approach.

Eurozone inflation figures are set to be released on Friday, with economists anticipating a slight increase to 2.5%. This rise is not expected to impede the ECB’s ability to ease monetary policy in the coming week.

The US personal consumption expenditures index, which is scheduled for release soon, is highly anticipated as it serves as the Federal Reserve’s favored inflation measure. Additionally, inflation data from Germany on Wednesday and further eurozone statistics on Friday will be closely monitored for indications of a potential European rate cut that traders are predicting for next week.

Attention will also be directed towards the upcoming OPEC+ meeting, which includes members of the Organization of the Petroleum Exporting Countries (OPEC) and allied nations like Russia. This online meeting is scheduled for June 2.

Sources from OPEC+ have suggested that an extension of output cuts amounting to 2.2 million barrels per day is a likely outcome in the near future.

Goldman Sachs has recently upgraded its forecast for global oil demand by 2030 and anticipates that consumption may peak by 2034 due to a possible slowdown in electric vehicle adoption. This scenario could result in refineries operating at higher-than-average rates through the end of the decade.