© Reuters.

Investing.com — Oil prices rose in Asian trade on Wednesday, with Brent coming close to bullish levels as the dollar sank ahead of key U.S. inflation data, while Chinese stimulus measures and a potential build in U.S. stockpiles were also in focus.

Crude prices had surged on Tuesday, tracking weakness in the , which sank to a two-month low on bets that the Federal Reserve was close to reaching peak interest rates in its current cycle. The greenback extended its fall into the Asian session, falling 0.4% against a basket of currencies.

Tightening supplies, as production cuts from Saudi Arabia and Russia took effect, also buoyed oil prices. 

futures rose 0.4% to $79.62 a barrel, their strongest level since early-May, while futures rose 0.3% to $75.03 a barrel by 21:32 ET (01:32 GMT). Both contracts rallied over 2% on Tuesday, settling at 10-week peaks.

Brent was close to breaking above $80 a barrel, which analysts said could send more bullish signals to crude markets.

U.S. CPI in focus amid Fed rate hike speculation

However, anticipation of key U.S. (CPI) inflation data spurred some cooling in oil’s recent rally. Wednesday’s CPI reading is expected to show lower headline inflation, while is expected to have remained sticky.

Stubborn core inflation is largely expected to invite more interest rate hikes from the Fed as it moves to cool high price pressures. The central bank is in an end-July meeting, with a slew of officials warning that more hikes are in store.

But several Fed officials also said that the Fed was close to concluding its rate hike cycle, which sparked a rally in risk-driven assets this week, while denting the dollar.

U.S. inventories seen rising 

Data from the (API) showed that U.S. crude stockpiles unexpectedly grew by over 2 million barrels in the week to July 7.

The API data usually heralds a similar reading from official due later on Wednesday, which is forecast to show a draw of 2.2 million barrels. 

China stimulus in store?

Oil markets were also awaiting signals on any more stimulus measures in major crude importer China, as the country grapples with a slowing post-COVID economic recovery.

Chinese Communist Party-backed media house the China Securities Journal reported on Wednesday that Beijing is likely to increase stimulus spending to support the economy, following a string of weak economic readings in the country.

Increased Chinese stimulus measures are expected to spruce up economic growth in the country, which in turn could help drive oil demand higher as domestic fuel consumption increases.