Crude oil prices started the week with a loss as traders await the latest inflation reading from the United States and the market prices in Russia’s stated plans to reduce oil production by half a million barrels.
The Bureau of Labor Statistics is releasing its consumer price index report for January tomorrow but a revision of December figures released last Friday showed that CPI for the last month of 2022 actually increased instead of decreasing as initially reported by the BLS.
The January reading is seen by analysts at 0.4 percent, according to a Reuters survey.
On top of worries about U.S. inflation and its effect on oil demand, traders are also bracing for news from the Fed this week.
“Crude prices are softening as energy traders anticipate a potentially weakening crude demand outlook as a pivotal inflation report could force the Fed to tighten policy much more aggressively,” senior OANDA analyst Edward Moya told Reuters.
“This week could deliver a make or break moment in how bad of a recession Wall Street prices in.”
Meanwhile, Russia’s production cut announcement, which contributed to last week’s rally in oil prices has run its course, with analysts noting that such a cut was already priced in.
“These cuts do not change our view on the market, given that we were already assuming that Russia would have to reduce supply as a result of the EU ban on oil and refined products. The weakness that we are seeing in prices in early morning trading today likely reflects the market coming to the realization that these cuts are already largely priced in,” ING wrote in a note, quoted by Investing.com.