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HomeLatestOil Prices Ascend as US Inventories Decline; Attention Shifts to CPI Inflation
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Oil Prices Ascend as US Inventories Decline; Attention Shifts to CPI Inflation

In Asian trading on Wednesday, oil prices climbed, propelled by industry data indicating a decrease in U.S. inventories, which heightened expectations of constrained supplies. Nevertheless, the anticipation surrounding crucial inflation data restrained the extent of the gains.

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Crude markets found encouragement from remarks made by Federal Reserve Chair Jerome Powell, who affirmed the resilience of the world’s largest economy. Additionally, China’s announcement of plans for a substantial 1 trillion yuan ($138 billion) bond issuance contributed to market strength.

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Expectations of tighter conditions in North American markets were reinforced by a series of devastating wildfires in Canada. Notably, Fort McMurray, a significant Canadian oil sands city, witnessed the evacuation of approximately 6,000 individuals due to an approaching fire.

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However, the increase in crude prices was moderated by the hotter-than-anticipated U.S. producer price index (PPI) inflation data released on Tuesday. This development instilled market apprehension regarding the possibility of a stronger-than-expected reading in consumer price index (CPI) inflation on Wednesday.

Brent oil futures expiring in July climbed by 0.4% to $82.70 a barrel, while West Texas Intermediate crude futures rose by 0.4% to $77.97 a barrel by 21:06 ET (01:06 GMT).

US Inventories Exceed Expectations

Data from the American Petroleum Institute (API) revealed on Tuesday that U.S. oil inventories declined by 3.1 million barrels in the week ending May 10, surpassing expectations for a draw of 1.1 million barrels. The report also indicated a reduction in gasoline stockpiles, while distillates rose by 349,000 barrels.

These figures fueled optimism that U.S. fuel demand was gaining momentum with the onset of the travel-intensive summer season—a trend that could contribute to tightening global crude supplies, despite U.S. production maintaining record highs.

The reduction in U.S. inventories, coupled with potential supply disruptions in Canada, presents a more constrained outlook for North American crude markets. Typically, the API data foreshadows a similar trend in official inventory data, which is slated for release later on Wednesday.

Inflation Concerns Heighten Ahead of CPI Data

Oil markets remained apprehensive ahead of the pivotal U.S. CPI data scheduled for later on Wednesday, particularly following the hotter-than-anticipated PPI data for April.

Traders remained cautious of any further indications of persistent U.S. inflation, which could prompt the Fed to prolong high-interest rates—a scenario that could adversely affect crude prices. Elevated rates are anticipated to impede global economic activity and potentially dampen demand for oil.

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