Oil Prices And Market Movements

• Brent Futures For July Delivery: Dipped by 5 cents to $81.81 per barrel; August futures rose by 21 cents to $82.09 per barrel.
• EIA Data Showed an unexpected 2 million barrel rise in gasoline inventories despite the start of the summer travel season.
• Eurozone Inflation: Rose more than expected in May, potentially influencing ECB’s rate-cutting plans.

Oil prices remained stable on Friday as investors eagerly awaited crucial U.S. inflation data, which could provide significant insights into future demand trends. This anticipation comes ahead of the highly anticipated OPEC+ meeting scheduled for Sunday, where key decisions about supply levels for the coming year will be discussed.

Market Movements And Current Prices

As of 1135 GMT, Brent futures for July delivery edged down by 5 cents, settling at $81.81 per barrel. Conversely, the more liquid August futures experienced a slight uptick, increasing by 21 cents to reach $82.09 per barrel. This shift resulted in the spread between the two contracts hitting an 11-month low, following a close in contango for the first time this year on Thursday.

Meanwhile, U.S. West Texas Intermediate (WTI) crude futures saw a modest rise of 8 cents, bringing the price to $77.99 per barrel. Both benchmarks appeared to be heading towards their most significant monthly declines since December, attributed to a surprising increase in U.S. fuel inventories revealed in the previous session.

U.S. Fuel Inventories And Market Reactions

Recent data from the Energy Information Administration (EIA) indicated a deeper-than-anticipated draw in crude oil stocks for the week ending May 24. However, this was overshadowed by a notable rise in gasoline inventories. These inventories increased by 2 million barrels, contrary to expectations of a 400,000-barrel draw. This surge occurred despite the onset of the U.S. summer travel season marked by the Memorial Day weekend. Typically, this period sees higher fuel demand.

Additionally, Citi analysts noted in a recent report that initial indicators pointed to robust driving and flying activity during the holiday weekend. However, fuel usage appeared more muted, suggesting efficiency gains. This nuanced dynamic has contributed to the current market uncertainty.

Inflation Data And OPEC+ Meeting

Adding to the market’s complexity, Eurostat data showed a higher-than-expected rise in eurozone inflation for May. While this increase is not anticipated to deter the European Central Bank (ECB) from reducing borrowing costs in the near term, it may influence the pace or duration of the rate-cutting cycle in the months ahead.

The oil market has faced considerable pressure in recent weeks due to the prospect of prolonged higher borrowing costs. These costs can restrict financial liquidity and dampen oil demand. Against this backdrop, all eyes are now on the upcoming OPEC+ meeting. At this meeting, the producer group is expected to discuss extending some of its substantial oil production cuts into 2025. According to sources familiar with the discussions, this complex deal aims to maintain market stability.

Rystad Energy analyst Mukesh Sahdev highlighted the group’s likely approach. He stated, “OPEC+ will likely remain in a pre-emptive market management mode to prevent contango and avert a sharp rise in oil prices.”

As the market awaits the dual impact of U.S. inflation data and the OPEC+ meeting outcomes, the stability of oil prices hangs in the balance. Consequently, the interplay of these factors will be crucial in determining the future trajectory of the oil market. Additionally, this will influence both supply and demand dynamics as the year progresses.

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