Brent crude prices declined on Tuesday as investors awaited U.S. inflation data set to be released later this week. Despite this, prices remained above $85 per barrel, following the previous session’s gains driven by escalating geopolitical tensions and anticipated increased summer demand.
By 1100 GMT, Brent futures for August delivery fell by 43 cents to $85.58 per barrel, while U.S. crude futures dropped by the same amount to $81.20 per barrel. Both benchmarks had climbed about 3% last week, marking their second consecutive week of gains.
“Front-month Brent prices may rise into the upper $80s shortly, fueled by a mix of rising geopolitical risks and positive market fundamentals, leading to steeper market backwardation,” noted Rystad Energy analyst Claudio Galimberti. Oil and fuel stockpiles have dwindled, with gasoline demand climbing as the U.S. enters its peak summer consumption period.
A preliminary Reuters poll on Monday indicated that U.S. crude oil stockpiles likely fell by 3 million barrels in the week ending June 21. Gasoline stocks were also expected to decline, while distillate inventories were predicted to rise. “The rise in oil prices is fueled by an optimistic demand outlook and shrinking U.S. inventories. With the onset of a hot summer and the upcoming hurricane season in the Northern Hemisphere, demand is projected to continue increasing in the months ahead,” said independent market analyst Tina Teng.
Investors are also eyeing Friday’s release of the personal consumption expenditures index, the U.S. Federal Reserve’s preferred measure of inflation, which will provide insights on potential interest rate reductions. Fed Governor Michelle Bowman reiterated that maintaining the current policy rate “for some time” would likely be sufficient to control inflation. A delay in rate cuts could suppress economic growth and limit fuel consumption.
Oil prices were further supported by ongoing Ukrainian drone attacks on Russian oil infrastructure. On June 21, Ukrainian drones targeted four refineries, including the Ilsky refinery, a major fuel producer in southern Russia.
