Oil prices traded lower on Tuesday, as investors waited for key U.S. inflation data and 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 11 cents, or 0.13%, to $81.52 per barrel by 0433 GMT and U.S. West Texas Intermediate crude futures slipped 3 cents, or 0.04%, to $77.71.
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 shortlived 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.
A decline in Saudi crude exports to China for a third straight month 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 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.
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