Crude oil prices began Tuesday trade with a dip as traders brace up for the April inflation data, to be released on Wednesday.
The data would give traders a hint about whether more rate hikes will be coming from the Fed after last week’s decision to raise the benchmark by another 25 basis points.
Brent crude was trading at $76.41 per barrel at the time of writing, with West Texas Intermediate at $72.60 per barrel. Both were down from opening although by a modest margin, after posting gains of over 2% on Monday.
Shut-in oil production of more than 200,000 bpd in Canada amid the wildfires in Alberta provided some support for prices.
"The market is cautious today ahead of the inflation data... With net long positions declining sharply over the last two weeks, a lot of traders are already out of the market, so volumes are low," DBS Bank lead energy analyst Suvro Sarkar told Reuters.
Some analysts, meanwhile, are calling a floor for oil. Citi’s Ed Morse told CNBC earlier this week that “Now it definitely feels like they’re at the bottom — there are multiple signs of that.
“Inventories built a lot during the first and second months of the year, and then they’ve come off. So that’s part of figuring that it’s at the bottom,” Morse added.
Meanwhile, the oil market is bracing up for even more volatility as traders rush to the exits amid continued fears for the state of the U.S. economy and global inflation trends.
Speculators have been consistently caught off-guard in the past two months, and many have now opted to stay away. Lower open interest and liquidity in the market is bound to make price swings even more extreme, according to analysts.
Some, however, expect stability after last week’s price rout.
"The oil market was extremely oversold and it will probably continue to stabilise as long as Wall Street is still confident the Fed will cut rates later this year," OANDA senior market analyst Edward Moya said in a note cited by Reuters.
By Irina Slav for Oilprice.com
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