Oil prices slipped on Tuesday (June 27) ahead of data shedding light on US appetite for fuel during the summer driving season, with the Brent benchmark's price structure indicating bulls are retreating.
By 1143 GMT, Brent crude futures were down US$1.36, or 1.8%, at US$72.82 a barrel, while US West Texas Intermediate (WTI) futures fell US$1.31, or 1.9%, to US$68.06 a barrel, erasing earlier gains.
Both contracts are trading broadly in the middle of a US$10 a barrel range traced since early May. Oanda analyst Craig Erlam said prices were mainly at the mercy of "the ever-changing expectations for interest rates".
European Central Bank President Christine Lagarde said on Tuesday that stubbornly high inflation will require the bank to avoid declaring an end to rate hikes. Higher rates can weigh on economic activity and thus oil demand.
European equities were also down.
US inventory data from the American Petroleum Institute industry group is expected after 2000 GMT, followed by government data on Wednesday. A Reuters poll indicated US inventories probably fell in the week to June 23.
Brent's six-month backwardation — a price structure whereby sooner-loading contracts trade above later-loading ones — is at its lowest since December and barely positive, indicating shrinking concern about supply crunches.
For the two-month spread, the market is in shallow contango, the opposite price structure, indicating traders are factoring in a currently slightly oversupplied market.
The oil market has shrugged off a clash between Moscow and Russian mercenary group Wagner which was averted on Saturday. Russian oil loadings have kept on schedule.
"The latest geopolitical flare-up quickly pales into insignificance compared to persistent macroeconomic considerations," said PVM's Tamas Varga.
This is the case despite Saudi Arabia's pledge to slash output from July.
Much depends on whether Chinese oil demand picks up in the second half. Premier Li Qiang said China will take steps to invigorate markets, without giving details.