Oil prices slumped on Tuesday, giving up some of their strong gains from the previous two sessions, and the market remained cautious ahead of April’s US inflation figures, which will be key to the US Federal Reserve’s next rate decision.
The Brent crude price was down 30 cents, or 0.4%, at 0340 GMT to $76.71 and West Texas Intermediate (WTI) crude fell 26 cents, or 0.4%, to trade at $72.90.
Both contracts gained more than 2% in the previous trading session. They have recovered somewhat in the last two sessions and get waiting. The market is cautious ahead of inflation data today. Due to net long positions that have fallen sharply in the last two weeks, many traders have exited the market and thus volumes are low.
US consumer price inflation figures for April will be released on Wednesday.
The Fed raised interest rates last week in what could be the latest increase in the tightening cycle and as inflationary pressure began to ease, it gave up guidance on the need for future hikes.
US consumers said they expected inflation to be slightly lower last month, according to a report by the New York Federal Reserve on Monday.
While oil markets fell sharply last week, prices rose on Friday and Monday as recession fears eased in the US, the world’s largest oil consumer and some traders found the three-week decline in crude oil exaggerated due to demand concerns.
The oil market has been oversold and will likely continue to stabilize as long as Wall Street is confident the Fed will cut interest rates later this year.
A series of voluntary production cuts by some members of the Organization of the Petroleum Exporting Countries and their allies begin this month, and the group holds its next meeting on June 4.
Oil prices won’t rise much from here, given all the fears about demand, but OPEC+ is expected to try to keep prices above $70 a barrel.
Meanwhile, it declared a state of emergency over the weekend in response to wildfires that bolstered oil prices, displaced nearly 30,000 people in Canada’s Alberta province, and prompted energy producers to shut down at least 280,000 barrels of oil equivalent per day of output 3%.