- The Oil price falls further as the minimal impact of Hurricane Beryl eases supply concerns.
- Fed Powell may provide cues about when the central bank will deliver rate cuts.
- This week, investors will focus on CPI reports for June from China and the US.
West Texas Intermediate (WTI), futures on NYMEX, extend its correction to near $81.00 in Tuesday’s early American session. The Oil price faces selling pressure as supply concerns ease after meteorological department showed that the Hurricane Beryl weakened into a tropical storm after hitting the Texas coast.
Before that, major oil-shipping ports near the Gulf of Mexico, such as Corpus Christi, Galveston, and Houston, were shut to any major damage to infrastructure from Hurricane Beryl.
On the geopolitical front, rising expectations of a ceasefire between Israel and Palestine have also eased risks of supply chain disruptions.
Meanwhile, investors await the Federal Reserve (Fed) Chair Jerome Powell’s semi-annual Congressional testimony, which is scheduled at 14:00 GMT. Investors will look for cues about when the Fed will start reducing interest rates this year. Powell is less likely to provide a concrete timeframe for rate cuts as policymakers doubt whether the disinflation process has resumed after stalling in the first quarter.
This week, investors will keenly focus on the Consumer Price Index (CPI) reports from China and the United States (US), which will be published on Wednesday and Thursday, respectively.
The Oil price will be significantly influenced by the China’s inflation data as the nation is world’s largest importer of Oil. China’s annual consumer inflation is expected to grow at a faster pace of 0.4%. Annual Producer Price Index (PPI) is estimated to have contracted at a slower pace of 0.8%.
Investors will keenly focus on the US inflation data to know whether the disinflation process has resumed.
Brent Crude Oil FAQs
Brent Crude Oil is a type of Crude Oil found in the North Sea that is used as a benchmark for international Oil prices. It is considered ‘light’ and ‘sweet’ because of its high gravity and low sulfur content, making it easier to refine into gasoline and other high-value products. Brent Crude Oil serves as a reference price for approximately two-thirds of the world's internationally traded Oil supplies. Its popularity rests on its availability and stability: the North Sea region has well-established infrastructure for Oil production and transportation, ensuring a reliable and consistent supply.
Like all assets supply and demand are the key drivers of Brent Crude Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of Brent Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of Brent Crude Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 13 Oil producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact Brent Crude Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
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