Oil rises 2% on lower-than-expected US inflation data
Add BT as a preferred source
OIL prices rose 2 per cent on Wednesday (Apr 12) as cooling US inflation data spurred hopes that the Federal Reserve is getting closer to ending its cycle of interest-rate hikes and cushioned the impact of a small build in US crude oil stocks.
Brent crude settled up US$1.72, or 2.01 per cent, at US$87.33 a barrel while US West Texas Intermediate closed up US$1.73, or 2.1 per cent, to US$83.26. Prices rose about 2 per cent on Tuesday.
The US Consumer Price Index (CPI) climbed 0.1 per cent last month after advancing 0.4 per cent in February, the Labor Department said. In the 12 months to Mar 31 the CPI increased 5 per cent, the smallest year-on-year gain since May 2021. The CPI rose 6 per cent year-on-year in February.
“The weaker US CPI print has raised doubts over whether the Fed will now hike rates at all next month,” said Fawad Razaqzada, market analyst at brokerage StoneX. “Falling interest-rate expectations is reducing recession concerns and helping to support buck-denominated asset prices at the same time.”
Government bonds, a gauge of global stocks, and gold rallied while the dollar dropped sharply after the data. A weaker US currency makes dollar-priced oil cheaper for buyers holding other currencies.
Hedge fund were buying oil futures in the market over the past few days in anticipation of improving demand, said Dennis Kissler, senior vice president of trading at BOK Financial.
Navigate Asia in
a new global order
Get the insights delivered to your inbox.
US President Joe Biden’s top economic adviser and ex-Federal Reserve vice chair, Lael Brainard, also said she was seeing inflation coming down.
Markets shrugged off a small build in US crude oil stocks, attributing it in part to a congressionally mandated release of oil from the US emergency reserve and lower exports at the start of the month.
Crude inventories rose by 597,000 barrels in the last week to 470.5 million, compared with analysts’ expectations in a Reuters poll for a 600,000-barrel drop.
US petrol stocks fell by 300,000 barrels, while distillate stockpiles, which include diesel and heating oil, fell by 0.6 million barrels. Both draw-downs were smaller than analysts’ forecasts.
A report from the American Petroleum Institute (API) showed crude inventories rose by about 380,000 barrels in the last week, while petrol inventories were also higher, according to sources.
Meanwhile, the global oil market could see tightness in the second half of 2023, which would push oil prices higher, said Fatih Birol, executive director of the International Energy Agency.
In a negative for oil demand, the International Monetary Fund on Tuesday trimmed its 2023 global growth outlook, citing the impact of higher interest rates.
The market is also waiting for clarity on oil demand and supply, with monthly reports from the Organization of the Petroleum Exporting Countries (Opec) and the International Energy Agency due on Thursday and Friday, respectively.
The US Energy Information Administration on Tuesday cut its forecast for oil production by Opec countries by 0.5 million barrels per day for the rest of 2023 and cut its 2023 world oil demand growth forecast by 40,000 bpd. REUTERS
Decoding Asia newsletter: your guide to navigating Asia in a new global order. Sign up here to get Decoding Asia newsletter. Delivered to your inbox. Free.
Share with us your feedback on BT's products and services
