Key facts
- Energy prices are expected to contribute to a cooler inflation reading for July.
- Oil prices saw significant volatility in July, with Brent crude averaging $83.51 a barrel.
- Investors are betting on lower oil prices in the long term.
- Gasoline prices have seen a moderation, though they have ticked up in August.
- The CPI energy component dropped 5.7% month-over-month in June 2026.
Energy prices are expected to contribute to a milder inflation reading for July, according to analysts. The monthly inflation data, due Wednesday morning, arrives after a volatile July for oil markets, which saw prices briefly surge above $100 a barrel before falling into the low $80s and then rising again toward month's end.
In June, the average price of Brent crude was $84.43 a barrel, which fell to an average of $83.51 in July. Investors are also anticipating further price declines, as indicated by futures contracts for December delivery, which averaged $79.32 a barrel in July, down from $80.38 in June. Chris Hyzy, chief investment officer for Merrill and Bank of America Private Bank, noted that oil prices did not remain at their peak levels long enough to significantly impact successive months.
The moderation in energy prices is expected to be reflected in lower gasoline prices, which are a primary component of crude oil. This decline is anticipated to lead to a slightly cooler overall inflation reading for July. However, Mark Zandi, chief economist at Moody's Analytics, suggested that a shortage in global refining capacity might be mitigating a steeper decline in gasoline prices. Despite this, gas prices have seen a slight increase in August, averaging $4.04 a gallon, up from $3.88 a month prior, and Brent crude is trading around $89 a barrel.
The U.S. Consumer Price Index (CPI) energy component, which includes gasoline, fuel oil, electricity, and natural gas, reportedly dropped 5.7% month-over-month in June 2026, following a 3.9% rise in May. While year-over-year figures still show significant increases, the projected reduction in energy prices suggests a potential easing of overall inflation pressures. Market participants will be closely monitoring the official CPI release from the Bureau of Labor Statistics to confirm these trends and assess the Federal Reserve's response.