Oil Prices Decline on Tuesday (May 14) Amid U.S. Data Concerns, But Potential Supply Risks from Middle East Tensions and Canada Wildfires Cap Losses

By the end of the trading session on May 14, Brent crude oil futures fell by 98 cents (equivalent to 1.18%) to 82.38 USD per barrel. WTI crude oil futures dropped by 1.10 USD (equivalent to 1.39%) to 78.02 USD per barrel.

The U.S. Producer Price Index (PPI) for April increased more than expected, raising concerns that the Federal Reserve (Fed) may continue to hike interest rates to combat inflation.

Fed Chairman Jerome Powell stated that he expects U.S. inflation to continue decreasing in 2024 but warned that he is not very confident at the moment, as inflation has risen faster than expected in the first quarter.

Tim Snyder, an economist at Matador Economics, commented, "The uncontrolled inflation story negatively impacts demand, and Powell's comments only add salt to the wound."

The U.S. Consumer Price Index (CPI) data, expected to be released on May 15, will influence the timing of interest rate cuts, which could boost economic growth and oil demand.

A stronger-than-expected inflation figure increases concerns that an overheated economy will force the Fed to raise interest rates again, which could hinder growth.

Meanwhile, on Tuesday, the Organization of the Petroleum Exporting Countries (OPEC) maintained its forecast for relatively strong global oil demand growth in 2024 and stated that the global economy might perform better than expected this year.

OPEC's monthly report indicated that world oil demand would increase by 2.25 million barrels per day in 2024 and by 1.85 million barrels per day in 2025.

The energy market is also monitoring wildfires in western Canada, which could drive up oil prices by disrupting supply.

Canada has a production capacity of 3.3 million barrels per day and is an important supplier of heavier crude oil.

Additionally, conflicts in the Middle East could limit the decline in oil prices. Israeli tanks have advanced further east into Rafah, reaching several residential areas of the southern border city, where over 1 million people are sheltering.

Phil Flynn, an analyst at Price Futures Group, noted, "The uncertainty regarding Rafah and the negative impact from that situation are also putting the market at risk of instability."

Source: Vietstock