WTI continues its winning streak near $71.80 ahead of US CPI data.

• The price of WTI extends its gains possibly due to expectations of a rise in the US monthly CPI.
• Markets expect the US CPI to decline to 3.1% year-on-year and the core CPI to remain at 4.0%.
• The growth of shale oil operations in the US and non-OPEC producers contributes to uncertainty in the crude oil market.
• Iran-backed Houthis attacked a commercial tanker in the Red Sea.

The price of West Texas Intermediate (WTI) tries to extend its gains for the fourth consecutive session awaiting the Consumer Price Index (CPI) data for November and the Federal Reserve (Fed) decision on interest rates . The price of WTI is offered around $71.80 per barrel at the beginning of the European session on Tuesday.

The market anticipates that the US Consumer Price Index (CPI) data will soften to 3.1% year-on-year from the previous 3.2%, and that the monthly inflation data will increase by 0.1%. The underlying CPI would remain at 4.0%. Higher inflation figures could bolster confidence in the US economy, which in turn could support the price of WTI oil. Positive economic indicators can help raise demand expectations, which would benefit oil prices in the market.

Looking at Wednesday’s Federal Open Market Committee (FOMC) policy decision, no change in rate adjustments is expected. According to the CME’s FedWatch tool, markets have priced in the FOMC to keep the rate within the 5.25%-5.50% range and are also pricing in a 25 basis point (bp) rate cut as early as March next year. Investors will closely monitor the Fed’s Monetary Policy Statement for possible rate adjustments in 2024.

The situation in the Red Sea is increasingly tense as the Iranian-backed Houthis threaten to disrupt shipping. Their actions, which include launching rockets at the US embassy in Baghdad and launching a land-based cruise missile that set a commercial ship on fire in the Red Sea, highlight rising tensions in the region.

Crude oil prices surged following the release of last week’s jobs data, indicating the resilience of the United States (US) economy. However, difficulties may arise due to continued concerns about global demand, particularly weak economic data from China, the largest oil importer, and other major economies. Growth in US shale oil development continues to outpace expectations. Additionally, profits from other non-OPEC producers have also been unexpectedly large. These dynamics highlight the resistance and expansion of oil production from sources outside OPEC+ members, increasing uncertainty in the crude oil market.