Oil prices reduced losses and closed the second week with growth
2023.01.14 13:51
Oil prices reduced losses and closed the second week with growth
By Kristina Sobol
Budrigannews.com – Although rising crude prices on their own could ultimately result in higher inflation, oil bulls are benefiting from the softer inflation game in the United States.
After reaching a session high of $79.93, New York-traded WTI (West Texas Intermediate) crude settled up $1.47, or 1.9%, at $79.86 per barrel. The losses from the previous week were completely erased when the benchmark U.S. crude rose 8.4% for the week.
After reaching an intraday high of $85.34, Brent crude traded in London ended the day up $1.25, or 1.5 percent, at $85.28. The global benchmark for crude gained 8.5% for the week, making up for all of WTI’s decline from the previous week.
The Labor Department reported on Thursday that in the year to December, inflation, as measured by the CPI, increased by 6.5 percent. It was the CPI’s slowest annual increase since October 2021, indicating that the Federal Reserve, which raised rates aggressively last year to ease price pressures, will likely increase rates less frequently this year.
The University of Michigan’s closely watched consumer survey revealed on Friday that the year-ahead among Americans fell for a fourth consecutive month in January, falling to 4.0% from 4.4% in December, adding to the data from the Labor Department. According to the survey, it was the lowest reading for price pressures since April 2021.
After the aggressive increases that rattled markets last year, the lower inflation readings indicate that the Federal Reserve will maintain this year’s smaller rate hikes, which would be greatly beneficial to businesses in the country. This week, these expectations have increased risk appetite in most forms, including oil.
In response to the coronavirus pandemic, the Federal Reserve raised interest rates seven times last year, adding 425 basis points to rates that had only been 25 basis points before. Markets were shocked when the central bank raised interest rates by 75 basis points in a row from June to November, followed by a modest increase in December.
Economists anticipate that the central bank will announce an even smaller 25 basis point increase for its subsequent rate decision on February 1. At the beginning of its current rate hike cycle in March 2022, the Fed made its last announcement of a 25-basis-point increase.
Some analysts said that improving demand from China as the top energy importer tries to make a vigorous comeback from its own coronavirus crisis could continue this week’s rebound in crude prices, which comes after last week’s drop of more than 8% on both WTI and Brent, which marked the worst annual debut for oil in years.
Others said that European buyers’ recent bids for crude could cause commodity prices to rise once more because oil is a major factor in inflation.
Ed Moya, an analyst at the online trading platform OANDA, stated, “Energy traders are starting to price in a little bit more crude demand coming out of Europe and not just China.” It appears that the oil market will remain tight.
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