Oil futures: Powell inflation comments offset bullish OPEC outlook

Quantum Commodity Intelligence – Crude oil futures Tuesday were lower as oil markets failed to react to another upbeat demand outlook from OPEC, instead focusing on US inflation and broader macroeconomics.

Front-month Jul24 ICE Brent futures were trading at $82.32/b (1805 GMT), compared to Monday's settle of $83.36/b with markets again testing two-month lows. 

At the same time Jun24 NYMEX WTI was trading at $77.97/b versus Monday's settle of $79.12/b.

Crude benchmarks had struggled to find a clear direction over the past few sessions, although traders said this week should bring some clearer guidance with monthly reports from OPEC and the IEA, while the US publishes its latest inflation figures on Wednesday.

First up was OPEC, but prices barely reacted after the producer group stuck with its upbeat outlook on 2024 demand, seeing growth at 2.25 million bpd for this year and another 1.85 million growth in 2025, supported by firm global economic growth.

Later the OPEC report was largely offset by comments from Federal Reserve Chair Jerome Powell saying that inflation is falling more slowly than Central Bank had expected, likely stalling any immediate rate cuts. 

"I do think it's really a question of keeping policy at the current rate for longer than had been thought," he said in comments relayed by CNBC Tuesday.

CPI

Meanwhile, April CPI figures on Wednesday are expected to have a major impact on the timing of the first Fed rate, as the higher-for-longer mantra gains traction.

"Recent statements from representatives of the US Federal Reserve have led to expectations that interest rates may remain elevated for an extended period. This prospect of sustained high rates is likely to dampen economic growth, which could, in turn, negatively impact fuel demand from American consumers," said RoboForex analyst Andrey Goilov.

Analysts also noted that recent US data showed a marked decline in US consumer confidence, reinforcing concerns that the economy might be losing its growth momentum.

Uncertainty over OPEC policy at the start of the week had dragged on prices, but markets improved when Iraq said it would support an extension to the current production policy.

Oil markets were also buoyed as surveys continued to show OPEC+ getting closer to its overall production ceiling, as Russia reins in crude output as it transitions from export cuts to production cuts.

On the downside, sluggish margins have increased the prospects of refiners trimming crude throughputs.