Oil prices experienced a modest rise in Asian trading on Thursday as the potential for tighter supplies overshadowed concerns regarding rising U.S. inflation. Investors kept an eye on forthcoming economic data from both the U.S. and China.
The previous session saw some consolidation in crude prices as data indicated that U.S. consumer inflation in August exceeded expectations slightly. However, analysts suggest that this reading may not be sufficient to prompt the Federal Reserve to raise interest rates again at its upcoming meeting next week.
While the inflation data garnered attention, it’s worth noting that U.S. inventories unexpectedly increased in the week ending September 8. A rise in gasoline and distillate inventories hinted at a slowdown in fuel demand as the summer season drew to a close. Additionally, U.S. production appeared to be nearing its 2020 record high. Nevertheless, these factors did not deter expectations of a tighter market, fueled by significant supply cuts from Saudi Arabia and Russia.
These supply cuts have been the primary drivers behind the recent surge in oil prices, pushing them to their highest levels in 10 months. Both the Organization of Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) indicated in their monthly reports this week that the prospect of tighter markets is expected to support prices in the coming months.
Brent oil futures saw a 0.3% increase, reaching $92.20 per barrel, while West Texas Intermediate crude futures climbed by 0.4% to $88.85 per barrel as of 00:32 GMT. Both contracts traded just below their highest levels for the year.
Market gains in oil prices remained relatively constrained, with a focus on more economic cues from the world’s largest oil consumers this week.
Upcoming economic data includes U.S. producer inflation and retail sales readings, which will provide further insights into price pressures in the country. Despite the unlikely prospect of an immediate rate hike by the Federal Reserve, the bank is expected to maintain its hawkish stance when it meets next week.
Recent strength in the U.S. dollar, driven by expectations of the Fed meeting, has somewhat limited crude oil’s upward momentum. The dollar remained below a six-month peak on Thursday.
China is also in the spotlight, with industrial production and retail sales data scheduled for release on Friday. This data is expected to offer more insight into the world’s largest oil importer.
While some economic indicators, particularly in trade and inflation, have shown marginal improvements in the Chinese economy in August, overall sentiment toward the country remains largely negative due to ongoing challenges in its economic recovery. This uncertainty has contributed to doubts about whether China will drive global crude demand to record highs this year, as predicted by OPEC.
