As US inflation data ease worries, oil prices rise
After U.S. inflation statistics sparked expectations that the Federal Reserve may have fewer interest rate rises in store for the largest economy in the world, oil prices increased on Wednesday, with benchmark Brent futures breaking $80 a barrel for the first time since May.
Consumer prices increased slightly in June, recording their lowest annual gain in more than two years, according to U.S. statistics. Markets anticipate one more increase in interest rates, but oil dealers are hopeful that will be all. Higher rates may impede economic expansion and lower demand for oil.
The number is the lowest it has been since the outbreak. But it’s crucial to remember that this is still a temporary circumstance. The inflation estimates are generally being welcomed by traders, according to Naeem Aslam, chief investment officer of Zaye Capital Markets.
Brent futures ended the day at $80.11 per barrel, up 71 cents or 0.9%. West Texas Intermediate (WTI) crude for the United States finished at $75.75 a barrel, up 92 cents or 1.2%. The International Energy Agency (IEA) and the U.S. Energy Information Administration (EIA) both predict that the market will become more competitive until 2024.
According to the IEA, the oil market will remain tight in the second half of 2023 due to high demand from China and other emerging nations as well as production curbs by major producers. This week, fresh IEA projections are anticipated.
“Either when supply is reduced or when demand is revised up, the oil balance becomes tighter. The shift may be seismic if both occur at the same time, according to PVM analyst Tamas Varga, who was referring to the EIA’s projection. It is evidently not concerned about a recession brought on by inflation that may reduce global oil use.
Russia will reduce exports by 500,000 bpd, while top producer Saudi Arabia promised last week to prolong a production reduction of 1 million bpd in August. The U.S. Energy Information Administration said that U.S. oil stockpiles increased by about 6 million barrels last week, which was much more than anticipated.
During the Fourth of July holiday week, gasoline stockpiles stayed nearly steady at 219.5 million barrels, a condition that is “almost unheard of,” according to Price Futures group analyst Phil Flynn. Analysts had anticipated a significant increase in demand for fuel stockpiles as people traveled for the holidays.
