By Paul Carsten
LONDON (Reuters) -Oil prices were steady on Tuesday, as investors waited for key U.S. and China CPI data as well as the outcome of the Federal Reserve’s policy meeting to glean a clearer picture of where inflation is heading and how that will affect fuel demand.
Brent crude futures fell 5 cents, or 0.06%, to $81.58 per barrel by 0817 GMT and U.S. West Texas Intermediate crude futures slipped 1 cent, or 0.01%, to $77.73.
Prices had climbed about 3% to a one-week high on Monday, buoyed by expectations that the Northern Hemisphere summer vacation season will boost fuel demand this summer, a gain some analysts said was likely to be short-lived given the prospect of higher interest rates remained.
The release of U.S. consumer price index data for May and the conclusion of the Fed’s two-day policy meeting are both scheduled for Wednesday.
“More conviction may be needed in oil prices for a more sustained recovery with a move above the US$83.00 level, given that the broader trend for oil prices still leans on the downside with a series of higher highs since April,” IG market strategist Yeap Jun Rong said.
Traders were also cautious ahead of the release of macroeconomic data from China on Wednesday.
“The potential adverse macro driver for oil prices will be China’s inflation data that will be out tomorrow,” said OANDA senior market analyst Kelvin Wong.
“The expected consensus estimates are looking for a further slowdown in the deflationary trend of China’s factory gate prices… but if the PPI numbers disappoint, it suggests that the deflationary risk spiral remains entrenched in China which in turn may likely see less demand of oil,” he added, saying a ‘disappointing’ figure would be at minus 2% year-on-year or much lower.
Meanwhile, Saudi crude exports to China falling for a third straight month also put further pressure on prices.
Higher refinery margins were helping to support oil prices, as was the potential that the United States could boost crude purchases for its petroleum reserve, some analysts said.
Profit margins for a typical Singapore refinery that processes Dubai crude have averaged around $4 a barrel in the past three trading sessions, up from May average of $2.56 a barrel, LSEG pricing data showed.
The prospect that if WTI stays below $79 the U.S. will move to build up its strategic reserves provided oil price support, said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan (OTC:NSANY) Securities.
The U.S. could hasten the rate of replenishing the Strategic Petroleum Reserve as maintenance on the stockpile is completed by the end of the year, Energy Secretary Jennifer Granholm told Reuters last week. It wants to buy back oil at about $79 a barrel.
Source:reuters