DTN Oil Update

Oil Futures Fell, Despite Tight Supplies, Lower PPI

HOUSTON (DTN) -- Oil futures pared gains Tuesday morning despite global supply tightness concerns driven by low U.S. crude inventories expectations and stricter sanctions on Russian oil.

The market remained on bearish ground despite the U.S. Bureau of Labor Statistics reporting a lower-than-expected Producer Price Index for final demand in December Tuesday morning.

The PPI for final demand rose 0.2% in December after seasonal adjustment, a slower pace than in November when the index increased 0.4% and flat to October's 0.2% gain. However, it was less than consensus for a 0.4% increase.

The PPI measures price increases at the producer level and provides a forward-looking indicator for inflation.

On Wednesday, the BLS is scheduled to release the U.S. Consumer Price Index for December, which the market consensus anticipates remaining unchanged at 0.3%, from November.

Analysts have predicted inflation will remain sticky throughout this year while the Federal Reserve is expected to delay interest rate cuts until October.

The front-month NYMEX WTI futures contract fell by $0.55 to $78.27 bbl while March Brent futures contract dropped by $0.56 to $80.45 bbl. The front-month RBOB futures contract fell by $0.0052 to $2.0951 gallon, the ULSD futures contract for February delivery edged down by $0.0250 to $2.5083 gallon.

The U.S. Dollar Index also reversed its multi-month gains and fell by 0.38% to 109.435 against a basket of foreign currencies.

Maria Eugenia Garcia can be reached at Maria.Garcia@dtn.com