As investors exercise caution ahead of new U.S. Consumer Price Index (CPI) data, oil prices remained stable in Tuesday’s Asian trading session. As of 01:58 GMT, Brent oil futures for April delivery recorded a marginal increase of 0.1 percent, hitting $82.06 per barrel. Rising by the same percentage point, U.S. West Texas Intermediate (WTI) crude futures reached $76.89 a barrel.
These developments follow a nearly flat performance in Monday’s trading after a 6 percent rise last week.
Implications
Oil prices remain relatively elevated as geopolitical conflicts in the Middle East continue. On Monday, Yemen’s Houthi group launched two missiles, attacking vessels in the Red Sea. This highlights the broader regional conflict’s potential to disrupt global oil supply chains.
Apart from the said tensions, market participants are also focusing on new Consumer Price Index (CPI) data, which will be released later on Tuesday. It could reflect an inflation figure lower than the previous month but is still higher than the Federal Reserve (Fed)’s annual 2 percent target.
Recently, the Fed warned that if inflation rates remain high, interest rates will also remain higher for longer. The prospect of enduring high interest rates and a strengthening dollar can exert more pressure on oil prices and dampen demand.
Further economic indicators, including inflation figures from the U.K. and GDP data from the eurozone, are also due later in the week. With slower economic growth in Europe, there will be more uncertainties about oil demand.
Read: Saxo Bank: Understanding crude oil dynamics as 2024 gets underway
New OPEC report
A new monthly report from the Organization of Petroleum Exporting Countries (OPEC) is also due on Tuesday. This will provide further insights into oil demand.
Furthermore, analysts note that market watchers should also pay close attention to the supply cut decision to be made by the broader OPEC+. The group, which includes allies like Russia, will convene in March and decide whether to extend its voluntary oil supply cuts.
“What will be of more interest in the coming weeks is what OPEC+ decide to do with their voluntary supply cuts, which expire at the end of March,” stated ING analysts.
They added, “Our balance sheet suggests that the market will be in surplus in the second quarter of 2024 if the group fails to roll over part of these cuts.”
In November, OPEC+ decided to reduce their oil production by approximately 2.2 million barrels per day (bpd) for Q1 2024. This decision included Saudi Arabia continuing its own voluntary cut of 1 million bpd.
An additional report from the International Energy Agency, expected on Thursday, will further contribute to the market’s understanding of potential movements of oil prices and the trajectory of oil demand.
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