By Barani Krishnan

Investing.com – Concerns about the U.S. Economy are keeping longs in oil trades from reaching the next place. 

Add to that the Biden administration’s zeal to bring crude prices down from their record highs with a potential ban on U.S. crude exports to boost domestic supply, and the rally in oil has good reasons to peter.

Oil prices drifted for a second straight day, before finally stabilizing slightly lower in New York for West Texas Intermediate (traded on the New York Stock Exchange) and slightly higher in London for Brent (based on the London exchange).

The July delivery settlement was at $109.77/barrel, down 52c or 0.5% after the price rose just one penny during the previous session.

By 3:00 PM ET (1900 GMT), August delivery had reached $111.16/barrel, an increase 38cs (or 0.3%) on the previous day. The previous session saw it rise 87 cents or 0.8%.

Since the huge gains made in April, the decline in crude oil prices over the last two months has been slower than the previous year. Contrary to this, U.S. fuel prices have continued their upward climb since March and reached record highs of over $4.50 for gasoline, and more than $6 for diesel. 

Tuesday’s mixed close in crude came after the U.S. Energy Secretary Jennifer Granholm confirmed that an embargo on oil shipments out of the United States was something the Biden administration hasn’t ruled out in order to ease the record highs in fuel prices. Granholm confirmed that “I can verify the president isn’t taking any tools off-the table”.

Ed Moya is an analyst for OANDA’s online trading platform.

“Oil prices remain directionless as energy traders try to assess how significant the deceleration in economic activity will be for the short-term crude demand outlook. The oil market remains tight but the Covid situation in China points to a gradual pickup in demand and that might keep this market range-bound a while longer.”

A steady stream of weak U.S. economic data — and a Wall Street on the cusp of bear market territory — have weighed on oil in recent days.

According to Tuesday’s Commerce Department data, monthly sales of new-built houses in the United States fell by two years in April. This confirmed the idea of a slowing housing market due to rising interest rates and mortgage rates. 

This comes on the heels data last week which showed that existing home sales in America fell for the third consecutive month in April due to rising interest rates and mortgage rates. Prior to that, the National Association of Home Builders said home building sentiment — a gauge of domestic construction activity — hit two-year lows in its early survey for May.

The U.S. economy plays an important role in housing and real estate. Approximately 65% of all occupied housing units are owned by owners, making them a significant source of wealth for households and a major provider of jobs. The 2008/09 financial crisis saw a collapse in the housing market, which led to what was later called the Great Recession. 

Threats to the global economy – a main theme of the Davos meeting this week – were also a reason for the oil market’s anemic sentiment.

China, the world’s largest oil importer, is stepping up quarantine efforts to end its Covid outbreak even as it plans to lift a more than two-month lockdown of its Shanghai business hub.

Market participants did not worry about economic concerns. They were looking for U.S. weekly oil inventory data on Tuesday, which will be available after settlement by API or the American Petroleum Institute.

At approximately 4:30PM ET (20:30 GMT), the API will publish a snapshot showing U.S. crude oil, gasoline, and distillates closing balances for the week ending May 20, 2018. This data will be used to prepare for official U.S Energy Information Administration inventory data.

Analysts from Investing.com have predicted that EIA would report a decline of 737,000 barrels last week in comparison to the drop of 3.39-million barrels during the week ending May 13.

On the front, the consensus is for a draw of 643,000 barrels that would add to the previous week’s decline of 4.78 million barrels.

With , the expectation is for a climb of 917,000 barrels versus the prior week’s gain of 1.24 million barrels.