Oil turns higher after US inflation grows less than forecast

Oil reversed course to trade higher after US inflation data came in cooler than expected. 

WTI futures added as much as 1.2% in New York, after earlier shedding 1.3%. Markets globally rallied after US consumer prices grew at a slower pace than anticipated. Traders quickly pared back bets on the Federal Reserve’s interest rate hike in December. 

Before the data, China’s top leaders reiterated the need to stick to the nation’s Covid Zero policy, while urging more targeting measures to fight the virus. The country is now adding curbs in the southern manufacturing hub of Guangzhou.

After Brent crude rallied toward $100 earlier this week, prices have pulled back on concerns about the demand outlook. Still, futures have regained some ground this quarter after the Organization of Petroleum Exporting Countries and its allies agreed to reduce supply. The market now faces several major catalysts in the coming weeks — an OPEC+ meeting and the start of sanctions on Russian oil flows in December, along with a Federal Reserve policy decision in the middle of next month. 

“Oil is very volatile,” said Giovanni Staunovo, a commodity analyst at UBS Group AG. “Some traders are downgrading expectations for interest rate hikes, and the market is switching from demand-led worries to more bullish sentiment.”

Prices:
  • West Texas Intermediate added 1.4% to $86.99 by 8:40 a.m. New York time.
  • Brent rose 1.6% to $94.12 a barrel.

US stock index futures and Treasury markets also surged after the inflation report. The figures showed the consumer-price index coming in softer than expected on a month-on-month basis as well as in its core reading. 

The disruption to Russian oil flows is creating turmoil in the oil tanker market. Benchmark supertanker earnings neared $80,000 a day on Wednesday, the highest level since May 2020. Tanker owners have said in earnings calls that they expect cargo distances to increase in the coming months due to sanctions on Russian exports. – BLOOMBERG