Yahoo Finance Oil Declines as US Inflation Data Remains Stubbornly Elevated
(Bloomberg) -- Oil fell as US economic data showed inflation remains elevated, adding to bets the Federal Reserve won’t rush to cut interest rates this year.
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West Texas Intermediate slid 1.4% to settle around $78 a barrel. Producer prices rose more than projected, though key components that feed into the Fed’s preferred inflation gauge were more muted. Federal Reserve Chair Jerome Powell said the central bank must wait for evidence that inflation continues to cool, doubling down on the need to keep borrowing costs elevated for longer. Traders will now look to consumer price data Wednesday for further clues on the policy trajectory.
Oil had traded in a narrow band Tuesday until the data release. Crude slipped further after Bloomberg reported some OPEC+ producers want their output capacity upgraded in a review.
Crude has been on a downward path since April, with the geopolitical risk premium from tensions in the Middle East largely evaporating. Refinery run cuts and narrowing timespreads have signaled a slightly softer market. Yet prices remain elevated for the year as OPEC and its allies restrict flows.
The Organization of Petroleum Exporting Countries and its partners have been restraining oil output in a bid to stave off a surplus and shore up crude prices. But OPEC+ is once again grappling with the thorny question of how much oil its members are actually capable of producing. The United Arab Emirates, Kazakhstan, Iraq, Kuwait and Algeria are among those whose potential to pump more next year is under scrutiny, according to people familiar with the matter.
Separately, an OPEC report published Tuesday showed that OPEC+ members making extra output cuts pumped 568,000 barrels a day above their agreed limit last month. The alliance is widely expected to extend curbs at a meeting June 1.
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