The WTI futures registered price movement just above the $90 mark as focus turned to upcoming U.S. inflation data for more cues on monetary policy, oil prices retreated from recent gains.
U.S. Crude Oil WTI Futures fell 0.5% to $90.34, while Brent Oil Futures shed 0.2% to $96.27.
Both contracts had surged as much as 3% on Monday on signs that crude demand remained resilient in major importer China.
Data earlier this week showed that China’s crude imports recovered sharply in July from a four-month low, as more parts of the country began to roll back COVID lockdowns.
Concerns over a drop in Chinese demand, on the back of sluggish factory data, had driven oil prices to a six-month low last week- levels seen before Russia’s invasion of Ukraine.
A potential global recession- stemming from the knock-on effects of the war, and the COVID-19 pandemic- is now expected to weigh on crude prices this year.
The focus is on U.S. inflation data which is due on Wednesday. The CPI print shall determine the pace at which the Federal Reserve will raise interest rates next month.
Given that fuel prices have eased from their peaks this year, and are a major contributor to CPI inflation, the reading is expected to have eased in July from the prior month.
Meanwhile, general consensus is for year-on-year growth of 8.7% in July, down from 9.1% in the prior month.
The Fed has hiked rates four times this year, and signaled that more are to come. The central bank had indicated a data-driven approach to tightening policy, meaning that the magnitude of its next hike will be largely based on July and August’s CPI readings.
Higher interest rates will weigh on business activity, and likely keep oil demand subdued. The United States has already logged two consecutive quarters of economic contraction, leading markets to believe that the country is already in a recession.
