Oil futures: Crude edges up ahead of US CPI data

Quantum Commodity Intelligence – Crude oil futures opened the week marginally higher as focus pivots back to macroeconomics, in particular the US and the timetable for rate cuts ahead of this week's inflation figures.

Front-month Jul24 ICE Brent futures were trading at $83.04/b (1720 GMT), compared to Friday's settle of $82.79/b and largely flatlining last week.

At the same time Jun24 NYMEX WTI was trading at $78.74/b, versus Friday's settle of $78.26/b.

Investors will be closely watching CPI inflation data for April, set to be released on Wednesday, with headline and core inflation expected to come in at 3.4% and 3.6% y-o-y, respectively, still well above the Fed's target.

"Recent months have witnessed significant price hikes in retail gasoline and other commodities, signalling another potentially 'hot' reading on monthly consumer inflation," said Stephen Innes, managing partner SPI Asset Management, noting higher prices are eroding consumer spending power.

Concerns over stubbornly high inflation come after recent comments from US central bank officials indicating the potential for prolonged higher interest rates, likely dampening demand for oil.

On Friday, Fed Governor Michelle Bowman said that the US central bank should proceed "carefully and deliberately" before trimming rates, while other official are scheduled to speak this week.

Crude prices have also trended lower over the past month on sluggish refining margins, dragged lower by weaker gasoline and diesel values. While distillate improved slightly last week, diesel cracks still sit close to 10-month lows, while gasoline margins have also sunk to multi-month lows.

Meanwhile, the political risk premium continues to erode, with oil flows largely uninterrupted despite high-profile conflicts, including Gaza and Russia/Ukraine.

"None of these events have severely disrupted supply of actual oil flows," Mike Muller, head of Asia at Vitol, told the Gulf Intelligence energy markets podcast on Sunday.

However, naval defence forces destroyed several drones fired by Yemen's Houthis over the weekend, the US military said Sunday, helping underpin Monday's higher prices. 

Prices also edged higher after Iraq said it is on board with extending OPEC+ production cuts beyond the current quarter, clarifying reports from the weekend suggesting that Baghdad was not in favour of extending the cuts.