Oil prices ease in cautious trade
JOHANNESBURG - Oil prices fell yesterday, relinquishing some of the strong gains in the previous two sessions while the market remained cautious ahead of US inflation figures for April, which will be key to the Federal Reserve’s next interest rate decision.
The Brent crude price was down 3c, or 0.4 per cent, at US$76.71 and US West Texas Intermediate (WTI) crude fell 26c, or 0.4 per cent, to trade at US$72.90 at 3.40am GMT. Both contracts had settled up more than two per cent in the previous trading session.
“Oil prices have rebounded somewhat in the last two sessions, so now is time for a pause ... with no real positive data coming out,” DBS Bank Lead Energy Analyst Suvro Sarkar said. “The market is cautious ahead of the inflation data. With net long positions declining sharply over the last two weeks, a lot of traders are already out of the market, so volumes are low.”
Rates
US consumer price inflation figures for April are due today.
The Fed raised rates last week in what may be the last hike of its tightening cycle. It dropped guidance about the need for future hikes, with inflationary pressure starting to ease.
US consumers said last month they expected slightly lower inflation in a year’s time, a report from the New York Federal Reserve showed on Monday.
While oil markets fell sharply last week, prices rose on Friday and Monday as fears of recession eased in the US, the world’s biggest oil consumer, and some traders saw crude’s threeweek slide on demand worries as overdone. “The oil market was extremely oversold and it will probably continue to stabilise as long as Wall Street is still confident the Fed will cut rates later this year,” Oanda Senior Market Analyst Edward Moya said in a note.
A round of voluntary output cuts by some members of oil cartel Opec begins this month and the group holds its next meeting on June 4.
“Oil prices won’t be able to rise that much from here given all the growth demand fears, but expectations are high for Opec to try to keep prices above the US$70 a barrel level,” Moya’s note said.
Also supporting oil prices, the Canadian province of Alberta declared a state of emergency over the weekend in response to wildfires that have displaced 30 000 people and prompted energy producers to shut in at least 280 000 barrels of oil equivalent a day, more than three per cent of Canada’s output.