Oil prices were little changed on Tuesday after rising in the previous session, with investors cautious ahead of U.S. consumer price data, although an expected surge in summer demand supported the market.
Brent crude futures for August rose 5 cents to $86.06 a barrel by 0440 GMT after gaining 0.9% in Monday trading.
U.S. crude futures for August delivery were up 6 cents at $81.69 a barrel after rising 1.1% previously.
Both benchmarks rose about 3% last week, marking two straight weeks of gains.
Demand for gasoline is rising and oil and fuel inventories have declined as the United States, the world’s largest oil consumer, enters peak summer consumption.
U.S. crude oil inventories are expected to have fallen by 3 million barrels in the week ended June 21, according to a preliminary poll by Reuters on Monday. Gasoline stocks are also expected to have declined, while distillate stocks likely increased last week.
“The surge in oil prices was triggered by an optimistic demand outlook and a reduction in U.S. inventories. With the northern hemisphere entering a hot summer and hurricane season approaching, demand is expected to continue to rise in the months ahead ” said Tina Teng, an independent market analyst.
Investors, however, remain cautious about a further rise in oil prices, as they fear that relatively high interest rates could limit growth in fuel consumption by dampening the economy.
With the U.S. Federal Reserve still focused on containing inflation, the release of the Personal Consumption Expenditures Index, the Fed’s preferred measure of price gains, on Friday will provide more guidance on rates.
Delaying an interest rate cut would keep the cost of borrowing higher for longer. “US household consumer spending data is in focus this week as it will provide clues on the Fed’s interest rate decision,” Teng added.
Oil was also supported by continued Ukrainian attacks on Russian oil infrastructure that could reduce crude and fuel supplies.
Most recently, on June 21, Ukrainian drones struck four refineries, including the Ilsky refinery, one of the main fuel producers in southern Russia.
The European Union has adopted a set of sanctions against Russia over its war in Ukraine. Twenty-seven vessels, including those run by Russian state-owned shipping company Sovcomflot, will be added to its list of sanctioned entities.
“In addition, the market remains nervous ahead of Iran’s elections later this week. A more intransigent president could lead to more direct confrontations with the United States, Israel and Saudi Arabia,” they said. ANZ Research analysts said in a note. (Reporting by Arathy Somasekhar in Houston and Emily Chow in Singapore; Writing by Jamie Freed and Christian Schmollinger)
