By Adedapo Adesanya
The oil market settled lower on Tuesday after data from the United States stoked concerns that interest rates may stay high, with Brent crude futures going down by 98 cents or 1.2 per cent to $82.38 a barrel and the US West Texas Intermediate (WTI) crude futures depreciating by $1.10 or 1.4 per cent to $78.02 a barrel.
US producer prices increased more than expected in April, feeding fears the Federal Reserve may keep borrowing costs elevated to fight inflation.
Recall that the Chairman of the US Federal Reserve, Mr Jerome Powell, said he expects US inflation to keep declining through 2024 but warned he is less confident now since prices rose more quickly than expected through the first quarter.
The US central bank early this month left its benchmark overnight interest rate unchanged in the current 5.25 per cent-5.50 per cent range, where it has been since July.
The Federal Reserve has raised its policy rate by 525 basis points since March 2022.
However, consumer price data on Wednesday could offer fresh clues on the timing of the much-awaited rate cut.
Another stronger-than-expected inflation reading could feed worries that a too-hot economy will force the US lender to raise rates again, which could hinder growth.
Meanwhile, on Tuesday, the Organisation of the Petroleum Exporting Countries (OPEC) stuck to its forecast for relatively strong growth in global oil demand in 2024 and said there was a chance the world economy could do better than expected this year.
OPEC’s monthly report said world oil demand will rise by 2.25 million barrels per day in 2024 and by 1.85 million barrels per day in 2025.
Petrochemical capacity expansions in China and the Middle East are also set to boost demand growth this year, according to the cartel.
Meanwhile, conflict in the Middle East could be lending a floor to prices. Israeli tanks pushed deeper into eastern Rafah, reaching some residential districts of the southern border city where more than a million people had been sheltering.
Aduragbemi Omiyale