Oil falls over $1 after US macro data, OPEC forecast weighs on investor sentiment; Brent at $82/bbl

International crude oil prices fell on Tuesday (May 14) after the latest US macroeconomic data suggested inflation remained sticky in the world’s biggest oil consumer. The Organization of the Petroleum Exporting Countries (OPEC) released its monthly report and maintained its demand forecasts for the year, which also weighed on investor sentiment.

Brent crude futures fell $1.08 to $82.28 a barrel, while U.S. West Texas Intermediate (WTI) crude futures lost $1.17 to $77.95 a barrel .

U.S. producer prices rose more than expected in April amid strong increases in the cost of services and goods, indicating that inflation remained elevated at the start of the second quarter.

Borrowing costs in the US have been stuck at high levels since last July as the government aims to stem sticky inflation.

Federal Reserve Chairman Jerome Powell said he expected U.S. inflation to continue to decline through 2024, but warned that his confidence in those declines had eroded after prices rose faster than expected in the first quarter.

“I expect inflation to come down again … on a monthly basis to levels that were more like the lower readings we had last year,” Powell said at a banking event in Amsterdam, adding: “I would say I’m confident . in that he is not so high as he was.’

“The inflation story is not under control, which is pulling demand back a bit and the thing that rubbed a little bit of salt in the wound was Powell’s comments,” said Tim Snyder, economist at Matador Economics.

US consumer price data expected on Wednesday will have a stronger impact on the timing of the long-awaited rate cut, which could boost economic growth and thus oil demand.

Meanwhile, the Organization of the Petroleum Exporting Countries on Tuesday stood by its forecast of relatively strong growth in global oil demand in 2024 and said there was a chance the world economy would do better than expected this year.

OPEC’s monthly report said global oil demand would rise by 2.25 million barrels per day (bpd) in 2024 and by 1.85 million bpd in 2025.

Energy markets were also watching wildfires in Canada’s far west that could disrupt the country’s oil supply.

Firefighters were racing Monday to contain a blaze in British Columbia and two in Alberta near the heart of the country’s oil sands industry.

“The spread of wildfires in the Alberta tar sands poses downside risks to our constructive production outlook in Canada, as massive wildfires in the same region eight years ago triggered a temporary shutdown of more than 1 million barrels per day of oil production” , Goldman Sachs analysts said in a note.

While no operational disruptions were reported, Canada’s 3.3 million barrels per day (bpd) production capacity was “very likely to be affected,” said Alex Hodes, an analyst at energy brokerage StoneX.

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