Oil rises 1pc ahead of US inflation data
Oil prices rose over 1 per cent in muted trade owing to public holidays in Britain and the United States after a downbeat week characterised by the outlook for US interest rates in the face of sticky inflation.
The Brent crude July contract settled $1, or 1.2pc higher at $83.12 a barrel. The more active August contract rose $1.04 to $82.88. US West Texas Intermediate (WTI) crude futures were up 93 cents at $78.65.
Brent lost about 2pc last week and WTI nearly 3pc after Federal Reserve minutes showed some officials would be willing to raise interest rates further if it were deemed necessary to control stubbornly high inflation.
“Sentiment in the oil complex … has been skittish as investors are constantly recalibrating expectations for the Federal Reserve’s monetary policy trajectory,” said Vandana Hari, founder of oil market analysis provider Vanda Insights.
Recent data emanating from Western economies has shifted rate-cut expectations depending on geography.
On Monday, key European Central Bank (ECB) policymakers said the bank has room to cut interest rates as inflation slows but must take its time in easing policy.
Figures for inflation in the eurozone are due on Friday and economists believe an expected tick up to 2.5pc should not stop the ECB from easing policy next week.
The US personal consumption expenditures index expected this week will be in the spotlight for further signals about interest rate policy. The index, due to be released on May 31, is viewed as the US Federal Reserve’s preferred measure of inflation.
German inflation data on Wednesday and eurozone readings on Friday will also be watched for signs of a European rate cut that traders have pencilled in for next week.
Eyes will also be trained on the coming meeting of the OPEC+ group of oil producers comprising the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia. The meeting is to take place online on June 2.
An extension to output cuts of 2.2m barrels per day is the likely outcome, Opec+ sources have said this month.
Goldman Sachs raised its global oil demand forecast for 2030 on Monday and expects consumption to peak by 2034 on a potential slowdown in electric vehicle adoption, keeping refineries running at higher-than-average rates till the end of this decade.
India’s Reliance Industries, operator of the world’s biggest refining complex, has signed a one-year deal with Russia’s Rosneft to buy at least 3 million barrels of oil a month in roubles, four sources aware of the matter told Reuters.
The shift to rouble payments follows Russian President Vladimir Putin’s push for Moscow and its trading partners to find alternatives to the Western financial system to facilitate trade despite U.S. and European sanctions.
A term deal with Rosneft also helps privately run Reliance to secure oil at discounted rates at a time when the OPEC+ group of oil producers is expected to extend voluntary supply cuts beyond June.
The OPEC+ group comprising the Organisation of the Petroleum Exporting Countries (OPEC) and allies including Russia is due to discuss the output cuts in an online meeting on June 2.
India, the world’s third-biggest oil importer and consumer, has become the biggest buyer of seaborne Russian crude since the West halted purchases and imposed sanctions against Moscow in the aftermath of Russia’s 2022 invasion of Ukraine. India has also paid for Russian crude in rupees, dirhams and Chinese yuan.
State-owned Indian refiners, meanwhile, have been tapping spot markets for Russian oil because they were unable to finalise term supplies for this year, Reuters has reported previously.