WTI Nears $78.50 as US Inflation Data, OPEC+ Meeting Loom

West Texas Intermediate (WTI) crude oil prices edged higher as traders anticipate the upcoming meeting of the Organization of the Petroleum Exporting Countries and allies, including Russia (OPEC+), scheduled for June 2. The meeting will address whether to extend the current voluntary output cuts of 2.2 million barrels per day into the second half of 2024. WTI was trading around $78.70 per barrel during Tuesday’s Asian trading session.

The rise in oil prices is also fueled by increased geopolitical tensions in the Middle East. Over the weekend, an Israeli airstrike in Rafah, Gaza, reportedly caused a significant fire, resulting in 45 casualties. This incident has intensified international reactions and added a geopolitical risk premium to oil prices. Additionally, the reported death of an Egyptian soldier in related strikes has further contributed to the risk concerns impacting oil markets.

Market focus is also on the US economic indicators, with traders awaiting the release of the Personal Consumption Expenditures (PCE) Price Index data on Friday. This inflation measure is closely watched by the Federal Reserve to guide its monetary policy decisions. Recent comments from Fed officials suggest a cautious approach to interest rate cuts, emphasizing the need for more substantial evidence of inflation trending towards the 2% annual target. Persistently high interest rates could dampen the US economic outlook and curtail oil demand.

Furthermore, developments in Iran could influence oil supply dynamics. According to reports from Iran’s Tasnim news agency, an economic council led by Iran’s interim president Mohammad Mokhber has approved a plan to boost the country’s oil production from 3.6 million barrels per day to 4 million barrels per day.