Oil Falls After Three-Day Advance Ahead of US Inflation Report

West Texas Intermediate fell below $73 a barrel on Wednesday after jumping 7.5% over the previous three sessions. US consumer price data Wednesday will be closely watched for indications of the Federal Reserve’s likely interest-rate path in the second half as the economy shows signs of a slowdown that could hurt energy use.

Crude faces downside risks if inflation comes in higher or lower than expected, said Edward Bell, senior director of market economics at Emirates NBD. Brisk price growth supports the Fed’s tightening policy, bolstering the dollar and hitting oil prices. Too low, and it could be interpreted as an indication of a cooling economy.

“You kind of want a ‘Goldilocks’ inflation report where it’s showing signs of slowing down but not a complete collapse in aggregate demand that would hit commodities,” Bell said.

Crude has retreated this year as worries over Fed tightening and a potential US recession outweighed a solid physical market and supply cuts by the Organization of Petroleum Exporting Countries and its allies. Still, Russian exports have continued to show little sign of ebbing despite Moscow saying its output curbs had almost hit a pledged goal of 500,000 barrels a day.

“The countdown to the US CPI data — which will be a huge determinant for market moves — has put sentiment on edge,” said Yeap Jun Rong, market strategist for IG Asia Pte. Still, the trend in recent months has been for a weaker dollar post-CPI and “if that holds true, oil prices may still find the catalyst for further upside,” he said.

Meanwhile, an industry-funded report on oil supplies showed a mixed picture in the US ahead of official data. Nationwide oil stockpiles rose 3.6 million barrels last week, but inventories fell at the key Cushing, Oklahoma hub, the American Petroleum Institute reported, according to people familiar with the figures. The snapshot also pointed to rising gasoline holdings but a drop for distillates.

The White House’s plan to begin purchasing oil to replenish the nation’s emergency reserve added some price support, along with output disruptions in Canada. Wildfires in Alberta may have reduced energy production by the equivalent of 500,000 barrels a day, according to Rystad Energy.

Prices:

• WTI for June delivery fell 1.3% to $72.75 a barrel at 11:08 a.m. in London.
• Brent for July settlement declined 1.3% to $76.41 a barrel.

Data from India, one of the Asia’s biggest crude importers, showed that diesel consumption swelled to a record last month. That follows recent figures from China that showed unprecedented refining volumes.

The market in China and Asia more broadly is at “an acceptable level of recovery,” Musabbeh al Kaabi, an executive director at Abu Dhabi National Oil Co., told Bloomberg Television Wednesday.