Prices Down On Lower Risk Sentiment & Higher Stocks, Focus On US CPI

Oil has more than unwound yesterday’s gains falling 0.7% during APAC trading after US crude stocks rose sharply last week. WTI is trading around $73.22/bbl and Brent $76.94, both just off intraday lows of $73.10 and $76.80 respectively. The USD index is almost unchanged ahead of the US CPI data. Risk appetite has deteriorated ahead of the release too.

• A lower than expected US inflation print could see oil rally towards this level as a Fed pause gets priced in, thus supporting the demand outlook. If it is higher than projected then it increases the chance of more hikes and thus the risk of a recession, which would be negative for crude.
• On Tuesday the US announced that the planned sale of crude from the SPR would be cancelled and that refilling would begin later in the year. Also on the demand side, Indian diesel consumption surged in April to a record level at a time when refiners in the region were concerned about falling Asian demand.
• The focus of the day is the US April CPI data which is forecast to rise by 0.4% m/m with headline remaining at 5% y/y and core easing 0.1pp to 5.5%. Real average weekly earnings for April and the April budget statement are also released. The official EIA US inventory data are due later.