Oil Steadies Ahead of US Inflation, EIA Stock Data

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange moved mixed in pre-inventory trade Wednesday as investors awaited the release of key inflation data in the U.S. that is expected to show the Consumer Price Index retreated for the sixth consecutive month in March, while an unexpected build in commercial crude oil stockpiles reported late Tuesday by the American Petroleum Institute limited buying interest for the U.S. crude benchmark.

Further details of the API report revealed commercial crude oil stockpiles increased by 377,000 barrels (bbl) for the week-ended April 7, missing an expected 600,000-bbl decline. Stocks at the Cushing, Oklahoma, tank farm, the New York Mercantile Exchange delivery point for West Texas Intermediate futures, continued lower with a 1.36-million-bbl draw.

Meanwhile, gasoline inventory added 450,000 bbl versus calls for a drop of 1.7 million bbl. Distillate inventories declined by 1.98 million bbl, according to the API figures, nearly four times an expected 500,000-bbl decrease. The U.S. Energy Information Administration is scheduled to release its weekly inventory report at 10:30 a.m. EDT.

The focus of Tuesday trading will likely be March inflation data scheduled for 8:30 a.m. EDT release by the U.S. Bureau of Labor Statistics. Economists expect the headline CPI index to ease 0.1% from February's 0.4%, driven by lower costs for energy and food. On an annualized basis, the CPI is seen posting a 5.2% gain after increasing 6% in February. The index for core services (excluding energy and food prices) is still seen advancing 0.4% month-over-month, lifting the annualized index to 5.6%. Such an increase for the core CPI would be higher than the 5.5% reading recorded in February and would match the September-February average.

This will likely tip the scales toward another interest rate increase at the Fed's May 2-3 meeting, despite the recent stress in the banking sector and signs of a sharper slowdown in the broader economy.

CME's FedWatch Tool shows nearly 70% of investors expect the Federal Open Market Committee to raise the federal funds rate by another 25 basis points at their next meeting in early May, up from 44% seen just a week ago.

Separately, the U.S. Energy Information Administration in its Short-Term Energy Outlook released Tuesday forecast lower global oil production this year, citing output cuts from the OPEC+ coalition and sanctions-related supply losses in Russia. The Washington-based energy watchdog reduced its outlook for OPEC production by around 500,000 barrels per day (bpd) for the second half of the year, forecasting an average fall of about 400,000 bpd compared with 2022 levels. The expected decline is substantially below the 1.2 million bpd production cut announced by OPEC members on April 3 as the coalition has largely underproduced on its prior targets and was unlikely to meet them in the coming months.

"In March, OPEC produced less than its previous targets, and in our March STEO, we had assumed that OPEC production would fall further below the prior production targets in the coming month," the EIA said in its monthly outlook.

For Russia, the EIA estimates petroleum and other liquids production will decline from 10.9 million bpd in 2022 to 10.6 million bpd in 2023 and to 10.4 million bpd in 2024, which are both about 300,000 bpd more than the agency forecast in last month's STEO.

"The observable impact on Russia's liquids production and exports in the latest available data has been less significant than expected. Although we still expect Russia's production to fall this year, its crude output outpaced our earlier expectations because its exports have continued to find buyers in markets outside of Europe," said the EIA.

Near 7:30 a.m. EDT, West Texas Intermediate futures for May delivery traded unchanged near $81.49 bbl, and the international benchmark Brent was near $85.66 bbl. NYMEX May RBOB futures declined $0.0444 to $2.8201 gallon, and the May ULSD contract slipped to $2.6656 gallon.

Liubov Georges can be reached at liubov.georges@dtn.com

Liubov Georges