Crude Lower As Higher US PPI Worries Market

Oil prices fell on Tuesday driven by a higher-than-expected US PPI. April CPI is released today and given recent inflation upside surprises will be watched closely. Oil markets are concerned that these developments will push Fed easing back further and weigh on energy demand. Fed Chair Powell reiterated that more evidence of easing inflation is needed before cutting rates. The USD index fell 0.1%.

• WTI fell to a low of $77.68/bbl following the PPI data. It finished down 0.9% at $78.45 and has started the APAC session around this level. A bearish theme remains intact with initial support at $76.89, May 8 low. The bull trigger is at $86.97.
• Brent is down 0.7% to $82.79/bbl after a low of $82.10. Brent remains vulnerable and initial support is at $81.71. The bull trigger is at $91.18.
• OPEC left its 2024 demand forecast at 2.2mbd in its monthly report. It reported lower production but Bloomberg data implies that output in April exceeded quotas by 568kbd due to overproduction in Iraq and Russia. OPEC meets on June 1 and will decide whether to extend cuts into H2, which is widely expected.
• Some OPEC members want their production capacity reviewed and increased, according to Bloomberg.
• Bloomberg reported that there was a US crude inventory drawdown of 3.1mn barrels last week, according to people familiar with the API data. Gasoline stocks fell 1.27mn while distillate rose 349k. The official EIA data is released later today.