Oil prices witnessed on Monday a slight decline due to mixed Chinese inflation data, which raised concerns about the world’s largest crude importer.
Additionally, market sentiment was fragile as investors awaited crucial U.S. inflation readings scheduled for later in the week.
The previous week had already seen crude prices suffer mild losses following weak U.S. consumer confidence data and projections of high inflation, both of which fueled worries about a potential economic slowdown in the world’s biggest fuel consumer.
Furthermore, data indicating an increase in U.S. gasoline and distillate inventories added to the negative sentiment.
Read more: Oil prices rise on strong Chinese demand, weakening U.S. labor market
By 20:58 ET (00:58 GMT), Brent oil futures expiring in July had fallen 0.3 percent to $83.53 per barrel, while West Texas Intermediate (WTI) crude futures dropped 0.3 percent to $77.59 per barrel.
Traders appeared to be discounting the risk premium associated with ongoing geopolitical tensions in the Middle East, as the Israel-Gaza conflict had thus far caused minimal disruptions to crude supplies.
However, recent declines in crude prices were tempered by speculations that the Organization of Petroleum Exporting Countries (OPEC) and its allies might extend production cuts beyond the end of June.
Chinese inflation data signals mixed cues
Over the weekend, Chinese inflation data for April was released, revealing a sustained recovery in consumer price index (CPI) inflation, likely due to continuous monetary support from Beijing that stimulated consumer spending.
Conversely, the producer price index (PPI) inflation in China contracted for the 19th consecutive month, indicating persistent weakness in factory and business activity in the world’s largest crude importer.
China’s oil imports for April experienced a slight decline compared to the previous month, while remaining relatively unchanged from the same period last year.
This reflects the challenges faced by the country in achieving a robust post-COVID economic recovery.
Upcoming US CPI inflation data awaits
In addition to concerns surrounding Chinese data, oil markets were also apprehensive about upcoming U.S. inflation readings.
The PPI data for April is set to be released on Tuesday, followed by the more significant CPI reading on Wednesday.
Market focus will largely be on any indications of cooling U.S. inflation, as this could potentially provide the Federal Reserve with further motivation to reduce interest rates.
The anticipation of persistently high U.S. interest rates has weighed heavily on oil prices in recent months, as elevated rates tend to dampen economic activity and erode oil demand.
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