Oil falls 1% on sticky US inflation, dampened geopolitical risk premium
Fed caution signals interest rates staying higher for longer
US gasoline pump prices fall for four straight weeks - EIA
Minutes from Fed's last policy meeting due on Wednesday
Weekly API oil inventory data shows gasoline, crude stocks up
Updates with API stock data, paragraphs 11, 12
By Georgina McCartney
HOUSTON May 21 (Reuters) - Oil prices settled 1% lower on Tuesday as lingering U.S. inflation looked likely to keep interest rates higher for longer, weighing on fuel demand.
Brent crude futures LCOc1 settled down 83 cents, or 1%, to $82.88 a barrel. U.S. West Texas Intermediate crude (WTI) futures for June CLc1, which expired on Tuesday, slipped by 54 cents, or 0.7%, to $79.26.
The more active July contract CLc2 settled down 64 cents, at$78.66.
Higher borrowing costs can slow economic growth and pressure oil demand.
"The market is very focused on gasoline demand in the U.S. because there are signs that consumers are cutting back because of inflation. Unless that turns around, the market is suggesting things could be a little bleak," said Phil Flynn, an analyst at Price Futures Group.
Ahead ofthis weekend's Memorial Day holiday, which kicks off the U.S. peak summer driving season, retail gasoline prices fell for the fourth consecutive week to $3.58 per gallon on Monday, the Energy Information Administration (EIA) said in its gasoline and diesel fuel update.
The U.S. will sell the nearly 1 million barrels of gasoline in a reserve in northeastern states, with bids due on May 28, the Department of Energy said on Tuesday.
U.S. diesel prices have also slipped, according to the EIA, down 5.9 cents on the week on Monday, at $3.89 per gallon. Diesel is a key refined product for both the industrial sector and transport.
Investors are awaiting minutes from the Fed's last policy meeting due on Wednesday, as well as weekly U.S. oil inventory data from the EIA, also due onWednesday.
"There is nothing in the market right now that is pushing prices higher. If we see a little bit of a stock draw tomorrow that may help push prices back up into the $78.50-$80 per barrel range," said Tim Snyder, economist at Matador Economics.
U.S. crude oil and gasoline inventories rose last week, while distillates fell, according to market sources citing American Petroleum Institute (API) figures on Tuesday.
The API figures showed crude stocks were up by 2.48 million barrels in the week ended May 17, the sources said on condition of anonymity. Gasoline inventories rose by 2.1 million barrels, and distillates fell by 320,000 barrels.
Two Federal Reserve policymakers on Tuesday said it was prudent for the U.S. central bank to wait several more months to ensure that inflation is back on a path to the 2% target before commencing interest rate cuts.
The economic outlook in Europe is more positive. European Central Bank President Christine Lagarde said in an interview she was "really confident" that euro zone inflation is under control. The ECB has all but promised a rate cut on June 6, so policymakers have shifted their attention to debating where rates will go thereafter.
The market appeared largely unaffected by the death of Iranian President Ebrahim Raisi, a hardliner and potential successor to Supreme Leader Ayatollah Ali Khamenei, in a helicopter crash on Sunday.
The structure of the Brent contract is weakening in an indication of a softer market and strong supply.
The front-month Brent contract's premium to the second-month contract LCOc1-LCOc2 narrowed to 10 cents, its weakest since January.
Reporting by Georgina McCartney in Houston, Noah Browning
Additional reporting by Deep Vakil in Bengaluru, Yuka Obayashi in Tokyo and Trixie Yap in Singapore
Editing by David Goodman, Marguerita Choy, Bill Berkrot, Kevin Liffey and David Gregorio
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
