Oil Prices Remain Near Weekly Lows as U.S. CPI Inflation Looms Large

Oil prices held near their weekly lows on Thursday, as markets dug in ahead of important U.S. inflation data due later in the day and a worsening demand forecast dampened sentiment.

Brent oil futures traded in London rose 0.1% to $92.65 per barrel by 21:21 ET, while U.S. West Texas Intermediate futures rose 0.1% to $87.33 per barrel (01:21 GMT). This week, both contracts are down approximately 6% due to hawkish Federal Reserve signals and profit-taking after last week's dramatic increase.

As a result of an increase in COVID infections in China, investors feared additional lockdowns in the world's largest petroleum importer, and prices fell. The Chinese trade and inflation numbers expected to be released on Friday should provide additional information on this front.

However, Thursday's CPI inflation data from the United States will dominate this week. It is predicted that the data would reflect that U.S. inflation remained stubbornly high in September, providing the Fed with further reason to continue raising interest rates.

The minutes from the Federal Reserve's September meeting revealed that the central bank has no plans to adjust its hawkish stance.

Concerns that rising inflation and interest rates will reduce economic activity and weigh on petroleum consumption have precipitated a precipitous decrease in oil prices this year, which is anticipated to continue in the near future.

The Organization of Petroleum Exporting Countries cut its oil demand forecasts for 2022 and 2023 on Wednesday, citing weak economic growth and high inflation as contributing factors. In an effort to increase petroleum prices, the cartel curtailed daily supply by 2 million barrels per day recently.

While the output cut generated an increase in oil prices, concerns about sluggish demand may swiftly wipe away these gains.

The American Petroleum Institute estimated a 7 million barrel increase in crude oil inventories in the United States last week; the government is expected to publish a 1.7 million barrel increase today.

Oil prices may rise if the United States releases extra supplies from its Strategic Petroleum Reserve, as the Biden administration vowed to do after the OPEC production cut.

However, oil prices may benefit from an increase in heating-related demand over the winter months. In addition, supply issues in Russia resulting from an escalation of the crisis in Ukraine may contribute to price increases.