●WTI price extends its gains possibly on expectations of a rise in monthly US CPI.
●Market expects US CPI (YoY) to ease to 3.1% and Core CPI to remain consistent at 4.0%.
●The growth of US shale oil operations and non-OPEC producers contributes to the uncertainties in the Crude oil market.
●Iran-backed Houthis attacked a commercial tanker vessel in the Red Sea.
West Texas Intermediate (WTI) price attempts to extend gains for the fourth consecutive session ahead of US Consumer Price Index (CPI) data for November and the Federal Reserve’s (Fed) Interest Rate Decision. The WTI price bids around $71.80 per barrel during the Asian session on Tuesday.
The market anticipates the annual US Consumer Price Index (CPI) figure to ease to 3.1% from the previous 3.2%, with the monthly inflation figure expected to rise by 0.1%. The US Core CPI is expected to remain steady at 4.0%. Higher inflation figures have the potential to reinforce confidence in the United States (US) economy, which could, in turn, provide support for the WTI oil price. Positive economic indicators may contribute to increased demand expectations, benefiting oil prices in the market.
As for the Federal Open Market Committee (FOMC) policy decision on Wednesday, the expectation is for no change in policy rate adjustments. According to the CME FedWatch Tool, markets have priced in the FOMC to maintain the rate within the range of 5.25%–5.50% and are also pricing in a 25 basis point (bps) rate cut as early as March next year. Investors will closely analyze the Fed Monetary Policy Statement for insights into potential rate adjustments in 2024.
The situation in the Red Sea is becoming increasingly tense as Iran-backed Houthis threaten to disrupt shipping. Their actions, including firing rockets at the US embassy in Baghdad and launching a land-based cruise missile that caused a commercial vessel to catch fire in the Red Sea, underscore the heightened tensions in the region.
Crude oil prices experienced an upswing after last week's labor data release, indicating resilience in the United States (US) economy. However, challenges may arise due to ongoing concerns about global demand, particularly with weak economic data from China, the largest oil importer, and other major economies. The growth in US shale oil operations continues to exceed expectations on the upside.
Additionally, gains across other non-OPEC producers have also been unexpectedly large. This dynamic highlights the resilience and expansion in oil production from sources outside the OPEC+ members, adding to the uncertainties in the Crude oil market.
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