Oil prices edged lower on May 9, relinquishing some of the strong gains of the previous two sessions amid cautious trading ahead of US inflation data for April, which will be key to the Federal Reserve's next interest rate decision. The Organization of the Petroleum Exporting Countries (OPEC) and its allies, knowns as OPEC+ will release its monthly oil report on May 11. The oil cartel last cut crude output in April with an aim to provide market stability, as per Saudi Arabia, OPEC's dominant member.

The Brent crude price was last down 54 cents, or 0.7 per cent, at $76.47 and US West Texas Intermediate (WTI) crude fell 50 cents, or 0.7 per cent, to trade at $72.66. Both contracts had settled up more than 2 per cent in the previous trading session. US jobs data provided support to oil prices in the previous session as 253,000 non-farm jobs were added in April. The unemployment rate hit 3.4 per cent last month, the lowest level since 1969. The US consumer price index (CPI) data for April - a possible trigger for oil markets, is due on May 10.


Where is oil headed?

The Federal Reserve raised rates last week in what could be the last hike of its tightening cycle. The US central bank dropped guidance on the need for future hikes, with inflationary pressure starting to ease. Consumers in US said they expected slightly lower inflation in a year's time, according to Fed's report.

"If tomorrow's CPI data remains at around 5% by market consensus, and if the core CPI does not drop significantly, it will likely continue to support the rise in oil prices," said CMC Markets analyst Leon Li told Reuters.

While oil markets fell sharply last week with benchmark contracts falling 7 per cent 9 per cent on market selloff, prices rose on Friday and Monday as fears of recession eased in the US- the world's biggest oil consumer. Some traders saw crude's three-week slide on demand worries as overdone. According to Goldman Sachs analysts, concerns over near-term demand and elevated supplies were “overblown". The investment bank kept its forecast for Brent crude at $95 per barrel by December and $100 by April.

 

Guidance for oil: OPEC+ meeting to be held next month

OPEC+ have said that their meeting in early June will be in person in Vienna rather than a virtual one. Experts say that this indicates the cartel is looking to be more active in supporting oil prices and that further output cuts might be forthcoming.

OPEC’s latest monthly oil market report will provide an updated reading on the demand and supply outlook. As per the April OPEC+ report, the world oil demand growth estimate for 2022 remains at 2.5 million barrels per day, broadly unchanged from the assessment in March. For 2023, it is also unchanged from March's assessment at 2.3 million barrels per day.

Meanwhile, the Saudi oil giant Aramco reported a first-quarter net profit of 119.54 billion riyals ($31.88 billion) earlier today, registering a drop of around 19 per cent from the corresponding period of the previous year. Aramco said the drop was mainly driven by lower crude prices, although partially offset by lower taxes and zakat and a rise in finance and other income.