Oil edged lower ahead of a decision on monetary policy from the Federal Reserve after rallying 6% over the previous two sessions.
US consumer prices posted the smallest monthly gain in more than a year on Tuesday, indicating the worst of inflation has likely passed and sparking hopes the Fed will ease the pace of its interest rate rises. West Texas Intermediate futures slipped toward $75 a barrel, while global benchmark Brent dipped.
China is ramping up vaccination efforts as the nation rapidly dismantles its Covid Zero policy, which has weighed on its economy this year. A surge in virus cases has raised concerns about near-term energy demand, but the easing of restrictions is expected to boost commodity consumption in the long term.
Crude is still on track for its first back-to-back quarterly decline since 2019 on concerns about the global economy. Goldman Sachs Group Inc. trimmed its oil price forecasts for early next year due to a weak outlook, while OPEC reduced estimates for the amount of crude it will need to pump in the coming months.
“OPEC signaling a slightly less-tight market balance across the first quarter of 2023” is weighing on the outlook, said James Whistler, the managing director of Vanir Global Markets Pte. “We see upside from here, particularly with supply side issues such as a delay in the Keystone restart and Russian price caps.”
TC Energy Corp. is targeting a partial restart of a segment of the Keystone oil pipeline on Wednesday and full resumption on Dec. 20, according to people familiar with the matter. Bad weather has hampered restart efforts.
The industry-funded American Petroleum Institute reported US commercial crude inventories rose by 7.82 million barrels last week, according to people familiar with the figures. Stockpiles at the key oil storage hub at Cushing, Oklahoma, as well as supplies of gasoline and distillates also gained. Government figures will follow.
The International Energy Agency will provide a snapshot on the oil market later Wednesday with the release of its monthly report.
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