Oil prices remain firm ahead of key US data

Oil prices remained steady on Tuesday, with WTI price oscillating around $78.0 per barrel. If oil prices drop, they may encounter support near $71.4 per barrel, while resistance may be found near $80.8 per barrel.

Oil prices rallied on Monday on the seasonal oil demand outlook. Increased oil demand outlook in the summer months is propping up oil prices. Oil prices remained steady on Tuesday as markets await the Fed’s policy meeting and the release of the US inflation report on Wednesday. 

Oil prices are kept in check by high central banks’ interest rates. The US Federal Reserve kept interest rates unchanged at its latest policy meeting within a target range of 5.25% to 5.50%. The US Fed is keeping interest rates at a 23-year high, restricting economic growth and limiting the oil demand outlook as a result. 

The next Fed rate decision is due on Wednesday, as well as the release of the US inflation report. Markets expect the Fed to keep interest rates steady on Wednesday and traders will pay close attention to the Fed’s dot plot on Wednesday, which is the summary of the central bank’s economic projections. The Fed will update its dot plot on Wednesday to consider recent inflation and economic data and provide estimates of the Fed’s interest rate outlook.

Odds of Fed rate cuts have become more moderate, putting pressure on oil prices, as policymakers have stated that they do not intend to start reducing interest rates until there is more evidence of disinflation. 

OPEC+ has decided to extend most of its voluntary production cuts into 2025 to boost oil prices. OPEC, however, announced that it would gradually phase out oil production cuts and laid out plans for restoring production levels within 2025. 

Supply concerns provide support for oil prices, as the crisis in the Middle East threatens to disrupt oil distribution. Tensions around the Red Sea area raise concerns that hostilities may spread further in the Middle East, affecting oil supply and distribution.

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Written by:
Myrsini Giannouli

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