Investing.com – Oil prices fell on Tuesday as signs that inflation remains stubbornly high put a damper on interest rate cut expectations just as the focus shifts to new US supply data.
AT 2:30 PM ET (18:30 GMT), the stock was down 1.1% at $82.42 per barrel, down 1.4% to $78.02 per barrel.
PPI surprises positively to keep interest rate cuts under control
US producer prices rose faster than expected by 0.5% month-on-month in April, mainly due to higher costs for services and goods, reflecting continued inflationary pressures at the start of the second quarter.
That was a faster pace than a 0.3% increase that economists had forecast, and higher than a downwardly revised month-on-month contraction of 0.1% in March.
The PPI data is “still above the threshold we see as compelling evidence that inflation is moving in the right direction,” Morgan Stanley said in a note.
In the 12 months to April, the producer price index for final demand rose by 2.2% as expected – the biggest increase since a 2.3% increase in April 2023. An updated figure for the previous month was also lowered adjusted to 1.8%. .
China outlines fiscal stimulus plans
There was a positive tone on Monday after China’s Finance Ministry said it plans to raise 1 trillion yuan ($138 billion) this week through a long-awaited bond issuance.
The issue is mainly intended to stimulate key aspects of the sluggish Chinese economy and will involve the issuance of special government bonds with a term of 20 to 50 years.
Chinese ministers said the bonds will be used to support sluggish economic growth and will be deployed in key sectors including infrastructure.
Although the issuance was largely telegraphed by Chinese authorities, its confirmation still provided some optimism about improving economic conditions at the world’s largest oil importer.
The bond offering came after the weekend’s mixed inflation data raised some concerns about a sustained economic recovery in China. While consumer inflation rose, producer inflation contracted for the 19th straight month.
Canadian wildfires could cause potential supply disruptions
In addition, large wildfires spread across Western Canada, bringing the potential for disruptions to Canada’s oil and gas supply, especially as they approached a major oil hub.
Residents of Fort McMurray, Alberta, were warned as the province saw two ‘extreme’ wildfires. The city is the closest settlement to Canada’s largest oil sands operations and suffered severe damage from wildfires in 2016.
Still, rain in the region helped reduce the immediate threat of the fires, although residents still remained on alert.
Any worsening of the wildfires brings the prospect of supply disruptions to Canada’s vast oil and gas industry, which is a key part of North American crude markets.
Canada’s worst-ever wildfire season, in 2023, has destroyed as much as 300,000 barrels of production per day. By 2016, damage to Fort McMurray had knocked about 1 million barrels per day out of service.
OPEC is keeping its forecast unchanged ahead of the meeting
In its monthly report, OPEC maintained its forecast that global oil demand will rise by 225 million barrels per day in 2024 and 1.85 million barrels per day in 2025, although stronger demand may be on the horizon as the group is sad that it expects stronger global economic growth this year. .
The unchanged forecast comes weeks before the next meeting between OPEC and its allies, or OPEC+.
Iraqi Oil Minister Hayyan Abdul Ghani is reported to have said this weekend that his country would accept voluntary production cuts from OPEC+, which also includes the Organization of the Petroleum Exporting Countries, Russia and other non-OPEC producers, at the upcoming meeting. honor. on June 1.
That was a reversal of his comments on Saturday that Iraq had made sufficient voluntary reductions and would not agree to new production cuts.
“The lack of price guidance lately is not a surprise, given the uncertainty about what OPEC+ members can do with their additional voluntary supply cuts,” ING analysts said in a note.
(Peter Nurse, Ambar Warrick contributed to this article.)
