Brent declines ahead of key US economic data

The front-month ICE Brent contract lost $0.33/bbl on the day, to trade at $82.88/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

The American Institute of Petroleum (API) reported a ‘larger-than-expected’ decline in US crude stocks, which has supported Brent futures. The official data from the US Energy Information Administration (EIA) is due later today.

US commercial crude inventories have declined by 3.1 million bbls in the week ended 10 May, surpassing the market's expectation of a smaller draw of around 1.4 million bbls, according to API estimates.

Leading oil producer group OPEC has kept its global oil demand growth estimate unchanged at 2.2 million b/d, projecting global demand to reach 104.6 million b/d in 2024. This news has provided some support to Brent futures today, analysts said.

“It [OPEC] also reported a fall in oil production ahead of its June meeting when output cuts will be reviewed,” ANZ Bank’s senior commodity strategist Daniel Hynes said.

Downward pressure:

Brent’s price gains were capped as the market turned its attention to inflationary concerns ahead of the US Consumer Price Index (CPI) data for April, scheduled for release later today.

The CPI number is a key indicator used to measure inflation, as it represents the average change over time in the prices paid by consumers for a basket of goods and services, including commodities.

On Tuesday, the US Federal Reserve’s (Fed) chairman Jerome Powell, reiterated that inflation in the US is declining at a slower pace than expected.

“These [inflation readings] were higher than I think anybody expected,” Powell said while speaking at the Foreign Bankers' Association in Amsterdam yesterday.

“The lack of progress on bringing down inflation continues to lower expectations of a rate cut in the near term,” Hynes added.

By Aparupa Mazumder

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