Oil prices decline Monday prior to US inflation figures being released Tuesday, a potentially crucial indicator of the Federal Reserve’s monetary policy going forward.

A barrel of European reference crude Brent goes for USD 85.82 Monday morning against USD 86.06 Friday afternoon. US counterpart West Texas Intermediate trades concurrently for USD 78.83 against USD 79.93 Friday afternoon.

On the whole, the US Consumer Price Index is expected to increase 0.5% month-over-month in January, while inflation is expected to go down to 6.2% from 6.5% in December. Moreover, core consumer price inflation discounting food and energy is expected to go down to 5.5% from 5.7% in the month prior.

Such trends can prove crucial for how the Fed will handle its monetary policy, a tightening of which will impair purchasing power, which in turn will weaken demand and oil prices as well.

”Crude prices are softening as energy traders anticipate a potentially weakening crude demand outlook as a pivotal inflation report could force the Fed to tighten policy much more aggressively,” says OANDA senior analyst Edward Moya to Reuters: 

”This week could deliver a make or break moment in how bad of a recession Wall Street prices in.”

Furthermore, oil prices are down on Azerbaijan’s resumption of oil exports to Turkey, informs CMC Markets analyst Tina Teng to Reuters.

Meanwhile, Russia announced an oil output cut of 500,000 barrels per day starting from March, corresponding to 5% of the nation’s total production. This comes as a response to Western nations’ price cap on Russian oil and oil products, sending prices up by 2% on Friday last week.