Oil Prices Steady as Markets Await U.S. Inflation Data and OPEC+ Meeting
Oil Prices Steady Ahead of U.S. Inflation Data and OPEC+ Meeting
Oil prices remained stable on Friday as investors awaited U.S. inflation data, which is expected to provide insights into the demand outlook. Attention is also turning towards Sunday's OPEC+ meeting, where decisions about future supply levels will be made.
Brent and WTI Futures
Brent Futures: July delivery futures fell by 44 cents, or 0.5%, to $81.42 a barrel by 1026 GMT. Meanwhile, the more liquid August futures rose slightly by 8 cents to $81.96 a barrel.
WTI Crude: U.S. West Texas Intermediate (WTI) crude edged down by 3 cents to $77.88 a barrel.
The spread between the two Brent contracts reached an 11-month low, entering contango for the first time this year, indicating a shift in market sentiment.
Monthly Performance and Inventory Data
Brent crude is heading for a monthly loss of about 7%, following a drop in the previous session due to an unexpected increase in U.S. fuel inventories. According to the Energy Information Administration (EIA), higher refinery utilization led to a larger-than-expected draw in crude oil stocks in the week ending May 24. However, gasoline inventories rose by 2 million barrels, contrary to expectations of a 400,000 barrel draw, even as demand was anticipated to increase ahead of the Memorial Day weekend.
U.S. Summer Travel and Fuel Efficiency
Citi analysts noted that the U.S. summer travel season kicked off with Memorial Day weekend, showing strong driving and flying activity. However, they observed that fuel use appeared more muted, suggesting gains in efficiency.
Eurozone Inflation
In the euro zone, inflation rose by 2.6% in May, exceeding the 2.5% forecast by economists polled by Reuters. Despite this increase, it is unlikely to deter the European Central Bank from cutting borrowing costs next week, although it may slow the pace of the rate-cutting cycle in the coming months.
Market Pressure and Expectations
The oil market has faced pressure in recent weeks due to the prospect of borrowing costs remaining high for an extended period, which can restrict funds and reduce oil demand. U.S. inflation data, scheduled for release at 1230 GMT, is highly anticipated by the market.
OPEC+ Meeting
Markets are also looking forward to the OPEC+ meeting on Sunday. The producer group is reportedly working on a complex deal that may allow it to extend some of its significant oil production cuts into 2025, according to three sources familiar with the discussions.
Commerzbank analysts stated, "The probable extension of the voluntary production cuts by OPEC+ should cause oil prices to rise again. Ultimately, this would threaten a significant undersupply on the oil market in the third quarter."
