Oil prices increase following the release of Chinese inflation data, with attention now turning to the upcoming US CPI figures
Oil prices rebounded on Monday, recovering from mild losses the previous week as traders assessed mixed Chinese inflation data ahead of crucial U.S. inflation reports scheduled for this week.
Brent oil futures rose by 0.7% to $83.33 a barrel, while West Texas Intermediate crude futures increased by 0.8% to $78.85 a barrel.
Chinese inflation data sends mixed signals April’s Chinese inflation data, released over the weekend, showed a steady rise in consumer price index inflation, indicating that significant monetary support from Beijing was aiding consumer spending. However, the producer price index inflation in China continued its decline for the 19th consecutive month, highlighting the persisting weakness in factory and business activity in the world’s largest crude importer.
China’s oil imports for April witnessed a slight decline from the previous month and remained largely unchanged compared to the same period last year, reflecting the challenges of a sluggish post-COVID economic recovery.
Supply concerns persist ahead of OPEC+ meeting Global supply issues remain a concern leading up to the June meeting of the Organization of Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+. Goldman Sachs stated in a recent note that it no longer anticipates OPEC+ to partially reverse voluntary production cuts next month, projecting Saudi Arabia’s crude oil supply to remain steady at 9 million barrels per day in July, revised down from an earlier estimate of 9.2 million barrels per day.
However, reports over the weekend indicated that Iraq’s oil minister announced the country’s reluctance to agree to further supply cuts. It remains unclear whether this refers to maintaining existing cuts or implementing deeper ones.
Focus on US CPI data Oil prices were under pressure last week following weak U.S. consumer confidence readings and high inflation forecasts, raising concerns about an economic slowdown in the world’s largest fuel consumer. Additionally, data showing an increase in U.S. gasoline and distillate inventories added to market apprehension.
As attention turns to this week, oil markets await key U.S. inflation data. Producer price index (PPI) data for April is expected on Tuesday, followed by the more closely monitored consumer price index (CPI) reading on Wednesday. Investors will closely scrutinize these reports for any indications of cooling U.S. inflation, which could prompt the Federal Reserve to consider interest rate cuts.
The possibility of sustained high U.S. interest rates, which are anticipated to dampen economic activity and reduce oil demand, has been a significant factor weighing on oil prices in recent months.
