Crude oil prices are set for a weekly decline, despite earlier gains driven by economic data. The benchmarks saw a rise following U.S. inflation data showing a monthly decline for June—the first in four years. Annually, however, inflation rose by 3%.
The news of the monthly decline supported oil prices. Brent crude regained ground, topping $85 per barrel after slipping below this level earlier in the week. The decline in consumer prices in China, seen as a negative by analysts, hinted at potentially weaker oil demand in the coming months.
The drop in the Consumer Price Index (CPI) also sparked hopes for an interest rate cut, which has been a focus for oil traders for months.
“Cooling US inflation numbers may support the case for the Fed to kickstart its policy easing process earlier rather than later, but it also adds to the series of downside surprises in U.S. economic data, which points to a clear weakening of the US economy,” said IG market strategist Yeap Jun Rong to Reuters.
SEE ALSO: How Much Is a Barrel of Brent Crude Oil Today?
Oil received further support from OPEC’s latest monthly report, where the cartel reiterated its expectations of strong demand for crude, projecting growth at about 2.25 million barrels per day for this year.
“Expected strong mobility and air travel in the Northern Hemisphere during the summer driving/holiday season is anticipated to bolster demand for transportation fuels and drive growth in the United States,” OPEC stated.
Should this prediction hold true, OPEC may consider rolling back some of its production cuts to prevent what ING’s Warren Patterson described as “a large deficit” in a recent forecast for the second half of the year. If not, OPEC will likely maintain its current production controls.