API Crude Inventories surprises the market with an unexpected rebound as the market awaits the release of US Dec CPI on Thursday.
USOIL – 4-Hour Chart
US oil prices fell on Wednesday after API data pointed to a large weekly build in US crude stockpiles.
US API crude inventories rose by 14.865 million barrels for the week ended Jan 6. The latest crude build compared with the rise of 3.298M barrels reported by the API for the previous week to Dec 30. Prior to that, the industry body reported back-to-back draws of 1.3M barrels and 3.069M barrels during the weeks to Dec 23 and Dec 16, respectively.
Although losses were limited by the prospect of strong demand this year and as the dollar softened on expectations of slower interest rate hikes, the USOIL price was $74 in the Asia trading session after the API report was released.
US crude demand is also expected to recover as the Federal Reserve slows its pace of interest rate hikes. In addition, markets are awaiting the consumer price index that will be released on Thursday.
Upcoming US December Consumer Price Index, the forecast is 6.5%; the previous was 7.1%.
CPI inflation is widely expected to have eased further in December from the prior month, putting less onus on the Fed to keep raising interest rates. However, a sustained downtrend in inflation is expected to spur the Fed into eventually pausing its rate-hike cycle. But given that inflation is still well above the Fed’s annual target range, markets remain uncertain about when the central bank could pause its rate hikes. Suppose the Fed delivered a pause on its rate hikes; the crude demand would increase and support the oil price rebound.