Investing.com-- Oil prices were largely steady in Asian trade on Wednesday as traders remained cautious ahead of a closely watched U.S. inflation report, while prices still hovered near a four-month high.
At 20:58 ET (01:58 GMT), Brent Oil Futures were unchanged at $79.95 a barrel, while Crude Oil WTI Futures expiring in March inched up 0.1% to $76.45 a barrel.
Oil had rallied at the start of this week and reached a four-month high on Monday after the Joe Biden administration introduced a comprehensive sanctions package aimed at cutting into Russia's oil and gas revenues.
This sparked concerns over tightening supply and the potential for increased demand from alternative sources, with analysts suggesting sanctions could push the price of Brent up to $90 per barrel.
Traders cautious ahead of US CPI
Traders are exhibiting caution ahead of the upcoming U.S. Consumer Price Index (CPI) release on Wednesday, following a December Producer Price Index (PPI) report that showed milder-than-expected inflation.
The PPI rose by 0.2% in December, aligning with forecasts, and marking a slowdown from November's 0.4% increase.
Despite the tempered PPI figures, concerns persist about potential inflationary pressures in the forthcoming CPI data. The Federal Reserve has already projected just two rate cuts in 2025, with officials expressing concern over inflation remaining elevated.
Higher interest rates bode well for the U.S. dollar, and when the greenback appreciates against other currencies, it makes oil more expensive for buyers using other currencies.
The US Dollar Index has consistently remained near a two-year peak after reaching it in December, creating pressure on oil prices.
The recent surge in oil prices, with Brent crude reaching $80 per barrel, adds another layer of complexity. While gasoline prices have not yet significantly impacted consumers, increases in diesel, jet fuel, and heating oil may contribute to inflationary pressures in the near term.
API reports smaller-than-expected decline in crude inventories
The American Petroleum Institute (API) report showed that U.S. crude inventories fell by about 2.6 million barrels for the week ended Jan. 10, compared with a draw of 4 million barrels reported by the API for the previous week. Economists were expecting a decline of 3.5 million barrels.
A smaller drawdown typically means that demand for crude oil may not be as high as anticipated, or that supply is more robust than expected.
Gasoline inventories rose by approximately 5.4 million barrels, while distillate stockpiles, including diesel and heating oil, expanded by 4.9 million barrels.
The official government report providing detailed inventory data is scheduled for release later in the day.