Oil prices rose on Tuesday, but investors remain cautious ahead of key interest rate decisions and inflation data. Concerns about oversupply and slowing growth in demand limited gains.
February Brent crude futures were trading up 47 cents, or 0.6%, at $76.50 a barrel as of 06:44 GMT. West Texas Intermediate (WTI) crude futures for January delivery gained 50 cents, or 0.7%, to $71.82 a barrel.
All attention today will be on US CPI data to potentially set the tone for upcoming meetings of US policymakers.
The US Consumer Price Index (CPI) report will be published on Tuesday, and the two-day monetary policy meeting of the Federal Open Markets Committee (FOMC) will end on Wednesday.
The US Federal Reserve is expected to keep interest rates steady on Wednesday. However, policymakers still worry that inflation may be stubborn.
Inflation advances will be monitored to confirm the effectiveness of current restrictive policies and give the Fed more room to consider rate cuts in 2024 if economic conditions worsen.
US officials said that a cruise missile launched from Houthi-controlled Yemen hit a commercial chemical tanker, causing fire and damage, but there was no loss of life. This situation escalates geopolitical tensions in the region and increases security risks for tankers on vital shipping lines, contributing to the rise in oil prices.
Meanwhile, European Union countries are focused on a ban on Russian diamonds and new measures to stop the flow of Russian oil and are close to agreeing on a proposed 12th sanctions package against Russia, according to four sources familiar with the matter.
But oil investors remain skeptical that total supply will fall after the OPEC+ group pledged to cut 2.2 million barrels per day (bpd) for the first quarter of 2024; because the increase in production in non-OPEC countries is expected to lead to a supply surplus next year.
Analysts and traders said the voluntary cut may not be long enough as crude oil physical prices and futures prices showed signs of increasing overhang before implementation.
While growth in US shale oil operations continues to surprise on the upside, gains from other non-OPEC producers have been unexpectedly large.
Both WTI and Brent are in a contango market structure where quick contracts are lower than forward contracts for the first few months of 2024. This suggests that investors felt there was lower demand or adequate supply for crude oil in those months.
