Investing.com-- Oil prices rose in Asian trade on Wednesday, sticking close to a 10-month high as the OPEC forecast tighter supplies, although anticipation of key U.S. inflation data and signs of a build in inventories kept gains limited.
Crude prices rallied sharply on Tuesday, hitting their highest levels for the year after a monthly report from the Organization of Petroleum Exporting Countries (OPEC) said that oil markets will tighten further this year amid robust demand and lower production.
The forecast came just a week after Saudi Arabia and Russia- two of the biggest oil producers in the world- announced deeper-than-expected supply reductions for the remainder of 2023.
This move triggered sharp gains in oil prices, and is expected to keep them underpinned in the coming months.
Brent oil futures rose 0.2% to $92.17 a barrel, while West Texas Intermediate crude futures rose 0.1% to $89.02 a barrel by 21:02 ET (01:02 GMT). Both contracts were sitting close to their highest level since November 2022.
Supply disruptions in Libya, due to a crippling storm, also pointed to near-term tightness for markets, while Kazakhstan said it was reducing its daily oil output for maintenance.
But on the demand front, U.S. inventory data suggested that fuel consumption in the world’s largest economy may be cooling after a strong summer season.
US inventories seen rising in past week- API
Data from the American Petroleum Institute (API) showed that U.S. crude inventories likely rose 1.2 million barrels (mb) in the week to September 8, ducking market expectations for a 2 mb decline.
Data also showed an over 4 mb build in gasoline inventories, and a 2.6 mb rise in distillates, coming just as the travel-heavy summer season wound down. The Labor Day holiday usually marks the end of the summer season.
The API data usually heralds a similar reading from government data, which is due later in the day. Analysts expect a stockpile draw of 2.3 mb, after a nearly 6 mb draw in the prior week.
CPI data on tap, higher fuel prices seen driving up inflation
Markets were also awaiting key U.S. consumer price index inflation data later in the day, which is expected to show that inflation likely accelerated in August, amid rising fuel prices.
Any signs of sticky inflation gives the Federal Reserve more impetus to hike interest rates- a scenario that could dent economic activity, and weigh on oil demand in the coming months. The Fed is set to decide on interest rates next week.
A hawkish outlook for the Fed also points to a stronger dollar, which could limit any more gains in oil prices. The greenback hovered below six-month highs on Wednesday.
Beyond U.S. inflation, Chinese economic cues are also due this week, with industrial production and retail sales data due on Friday.