Oil Prices Steady as Markets Eye U.S. Inflation Data
Oil prices remained largely unchanged during Asian trading on Wednesday, with traders exercising caution ahead of a key U.S. inflation report. Prices continued to hover near a four-month high.
As of 20:58 ET (01:58 GMT), Brent Oil Futures were flat at $79.95 per barrel, while March Crude Oil WTI Futures edged up 0.1% to $76.45 per barrel.
The recent rally in oil prices, which pushed Brent crude to a four-month high earlier this week, was driven by the Biden administration’s new sanctions targeting Russia’s oil and gas revenues. These measures raised concerns about supply disruptions and increased demand for alternative sources, with some analysts predicting Brent could climb to $90 per barrel.
Traders Await U.S. CPI Data
Caution prevailed among traders ahead of the U.S. Consumer Price Index (CPI) release later on Wednesday. This follows December’s Producer Price Index (PPI) report, which showed a milder-than-expected 0.2% increase, in line with forecasts and below November’s 0.4% rise.
Despite the softer PPI figures, worries linger over persistent inflation, which could be reflected in the CPI data. The Federal Reserve has indicated plans for only two rate cuts in 2025, with officials voicing concerns that inflation could remain elevated.
Higher U.S. interest rates typically strengthen the dollar, which in turn makes oil more expensive for holders of other currencies. The U.S. Dollar Index has remained near a two-year high since December, adding downward pressure on oil prices.
While Brent crude has risen to around $80 per barrel, gasoline prices have yet to significantly affect consumers. However, higher costs for diesel, jet fuel, and heating oil could exacerbate inflationary pressures in the near future.
API Reports Smaller-than-Expected Decline in Crude Inventories
Data from the American Petroleum Institute (API) revealed that U.S. crude oil inventories dropped by about 2.6 million barrels for the week ending January 10. This was below economists’ expectations of a 3.5 million-barrel decline and less than the 4-million-barrel draw reported in the previous week.
The smaller-than-anticipated drawdown suggests either softer demand for crude oil or a more robust supply.
Additionally, gasoline inventories rose by 5.4 million barrels, while distillate stockpiles, including diesel and heating oil, increased by 4.9 million barrels.
The official U.S. government report, offering more comprehensive inventory data, is due later in the day.
