Oil prices fell back slightly as traders braced for a potential rise in US crude inventories, even as the market remained buoyed by easing trade tensions between Washington and Beijing.
Brent crude futures were down 0.6%, to trade at $66.21 a barrel on Wednesday, while West Texas Intermediate futures lost 0.7%, hitting $63.25 a barrel.
Both contracts have been hovering near two-week highs, underpinned by optimism after the US and China temporarily agreed to scale back reciprocal tariffs.
Markets were focused on preliminary figures from the American Petroleum Institute, which indicated US crude stocks had risen by 4.3 million barrels in the week to 9 May. Official data from the US Energy Information Administration is expected later on Wednesday.
"This sharp contrast to last week's substantial draw signals that the demand side is still grappling with significant challenges, leaving market watchers on edge and wondering where the next twist will come from," said Priyanka Sachdeva, senior market analyst at Phillip Nova.
In a separate note, analysts at Goldman Sachs (GS) pointed to Trump's apparent preferences for oil prices, derived from his prolific social media activity.
The president’s “inferred preference for WTI appears to be around $40 to $50 a barrel, where his propensity to post about oil prices bottoms,” the team wrote. Trump “has always been focused on oil and on US energy dominance, having posted nearly 900 times,” on the topic, Bloomberg reported.
Sterling nudged higher against the dollar in early European trading on Wednesday, gaining 0.3% to $1.3347, after softer-than-expected US inflation data prompted a retreat in the greenback.
US consumer prices rose 2.3% in April, down from 2.4% in March and below analysts’ expectations. The data came in the same month that US president Donald Trump imposed sweeping global tariffs. On a monthly basis, prices rose 0.2%, compared with a 0.1% decline in March.
The dollar weakened following the release, with the US dollar index (DX-Y.NYB), which measures the greenback against a basket of six currencies, slipping 0.2% to $100.76.
Cooling inflation typically supports market bets on interest rate cuts. However, expectations for the Federal Reserve to hold interest rates steady at its July policy meeting remained unchanged. According to the CME FedWatch tool, the probability of the Fed keeping rates within the 4.25% to 4.5% range stayed at 61.4%, the same level as on Monday before the CPI release.
The likelihood of rates being held steady has risen significantly in recent days, up from 29.8 % a week ago, after the US and China agreed to scale back tariffs in a move seen as supporting the economic outlook. The improved trade sentiment has prompted investors to reassess the timing of potential rate cuts, tempering the impact of falling inflation on rate expectations.
The pound lost ground versus the euro, slipping 0.1% to €1.1877, as the single currency found support from fading expectations of aggressive interest rate cuts by the European Central Bank.
The euro strengthened as easing trade and geopolitical tensions prompted investors to reassess the outlook for ECB policy. Recent comments from policymakers have added to the shift in sentiment. ECB executive board member Isabel Schnabel said on Friday that the central bank should hold off on further cuts to borrowing costs, warning that global economic uncertainty was fuelling price pressures and inflation could overshoot the ECB’s 2% target in the medium term.
The less dovish tone from ECB officials, combined with a more stable global backdrop after the US-China trade agreement, has helped buoy the shared currency.
Gold futures were down by 0.1% to $3,242.60 per ounce, while the spot gold price lost 0.6% to $3,236.54 per ounce.
"Despite yesterday’s rebound, gold continues to show clear signs of short-term weakness," XS.com analyst Linh Tran said.
"The precious metal is now trading steadily below $3,300/oz as key drivers in recent weeks — including trade tensions and inflationary pressure — have simultaneously shown signs of easing. The strong upward momentum that previously supported gold appears to be losing steam for now, as markets reassess global risk expectations and the likely path of future monetary policy."
On Monday, Trump said he does not see tariffs on Chinese imports returning to 145% after the 90-day pause, adding that he believes Washington and Beijing will have a deal.
"Positive developments in the US trade policy [are] diminishing the appeal of gold in the short term," Capital.com's financial market analyst Kyle Rodda said.
"I think that if we see continued progress in trade negotiations and deals being done between the US and its trading partners, gold can pull back further. $3,200 is a pretty critical level of support."
In broader market movements, the FTSE 100 (^FTSE) was muted on Wednesday morning, trading at 8,608 points at the time of writing. For more details, check our live coverage here.
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