Oil prices fell on Tuesday ahead of data revealing US demand for petrol during the summer driving season, with the price structure of the Brent benchmark indicating bulls are retreating.
Brent oil prices were down $1.36, or 1.8%, to $72.82 a barrel at 1143 GMT, while West Texas Intermediate (WTI) futures were down $1.31, or 1.9%, to $68.06 a barrel, erasing previous gains.
Both futures are trading roughly in the centre of a $10 per barrel range that has been in place since early May. According to Oanda analyst Craig Erlam, prices are mostly influenced by “ever-changing interest rate predictions.”
European Central Bank President Christine Lagarde said on Tuesday that stubbornly high inflation will require the bank to avoid declaring an end to rate hikes. Higher rates can weigh on economic activity and thus oil demand.
European equities were also down.
U.S. inventory data from the American Petroleum Institute industry group is expected after 2000 GMT, followed by government data on Wednesday. A Reuters poll indicated U.S. inventories probably fell in the week to June 23.
Brent’s six-month backwardation – a price structure whereby sooner-loading contracts trade above later-loading ones – is at its lowest since December and barely positive, indicating shrinking concern about supply crunches.
For the two-month spread , the market is in shallow contango, the opposite price structure, indicating traders are factoring in a currently slightly oversupplied market.
The oil market has shrugged off a clash between Moscow and Russian mercenary group Wagner which was averted on Saturday. Russian oil loadings have kept on schedule.
“The latest geopolitical flare-up quickly pales into insignificance compared to persistent macroeconomic considerations,” said PVM’s Tamas Varga.
This is the case despite Saudi Arabia’s pledge to slash output from July.
Much depends on whether Chinese oil demand picks up in the second half. Premier Li Qiang said China will take steps to invigorate markets, without giving details.
