Global crude rises 1% ahead of inflation data after a down week

Brent crude for July settled $1, or 1.2 percent higher, at $83.12 a barrel. The more active August contract rose $1.04 to $82.88. U.S. West Texas Intermediate (WTI) crude futures were up 93 cents at $78.65.

Brent lost about two percent last week and WTI nearly three percent after Federal Reserve minutes showed some officials would be willing to raise interest rates further if deemed necessary to control stubborn inflation.

“Sentiment in the oil complex … has been choppy as investors are constantly recalibrating expectations for the path of the Federal Reserve’s monetary policy,” said Vandana Hari, founder of oil market analysis provider Vanda Insights.

Recent data from Western economies has changed expectations for rate cuts by geography.

On Monday, top European Central Bank (ECB) policymakers said the bank has room to cut interest rates as inflation slows, but it must take time to ease policy.

Eurozone inflation figures are due on Friday, and economists believe an expected rise of up to 2.5% should not prevent the ECB from easing policy next week.

The US personal consumption expenditure index, expected this week, will be in focus for further signals on interest rate policy. The index, due for release on May 31, is seen as the preferred measure of inflation by the US Federal Reserve.

Wednesday’s German inflation data and Friday’s euro zone readings will also be watched for signs of a European rate cut that traders have penciled in for next week.

Eyes will also be trained on the upcoming meeting of the OPEC group of oil producers comprising the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia. The meeting will take place online on June 2.

An extension of output cuts of 2.2 million barrels per day is the likely outcome, OPEC sources said this month.

Goldman Sachs raised its forecast for global oil demand to 2030 on Monday and expects consumption to peak by 2034 as a potential slowdown in electric vehicle adoption keeps refineries running at higher-than-average rates until at the end of this decade.

Date of first publication: May 28, 2024, 06:49 IST