Oil prices steady as US data keeps June rate cuts on the table

LONDON: Oil prices were little changed Thursday as January U.S. inflation data reinforced expectations for a June cut to interest rates.

Brent crude futures for April were down 2 cents at $83.66 a barrel by 1355 GMT. The April contract expires on Thursday and the more active May contract was up 2 cents at $82.17. U.S. West Texas Intermediate crude futures rose 25 cents to $78.79.

Brent has hovered comfortably above the $80 mark for three weeks, with the Middle East conflict having only a modest impact on crude flows.

A Reuters survery of 40 economists and analysts on Thursday forecast an average price of $81.13 a barrel for the front-month contract this year.

The Federal Reserve’s preferred inflation gauge, the U.S. personal consumption expenditures (PCE) index, took centre stage on Thursday. The data showed January inflation in line with economists’ expectations, keeping a June interest rate cut on the table.

Oil gains on possible shipping disruptions

Reports on consumer and producer prices earlier in February signalled sticky inflation and a guarded approach from Fed policymakers, which prompted investors to push back expectations of rate cuts to June from March.

Meanwhile, euro zone inflation dipped further this month, strengthening the case for the European Central Bank to start easing interest rates later this year, data from some of the region’s biggest economies showed on Thursday.

High interest rates have been used in many major Western economies to curb inflation, potentially reducing economic growth and oil demand.

Meanwhile, U.S. crude inventories have risen for a fifth consecutive week, increasing by 4.2 million barrels, the Energy Information Administration said on Wednesday. Inventories had been expected to rise by only 2.7 million barrels..

An extension to voluntary oil output cuts from the OPEC+ producer group is also on the cards.

“With the demand outlook remaining uncertain, we think OPEC will extend the current supply agreement to the end of the second quarter,” ANZ analysts said in a note.

The Middle East conflict shows no signs of abating, meanwhile, with both Israel and Hamas playing down prospects for a truce in their war in Gaza. Qatari mediators have said the most contentious issues remain unresolved.