Americas News
Oil Up On Sudden Hope That Central Banks Will Curb Rate Hikes
In a bold if questionable display of hope, oil traders extended the commodity's gains on Wednesday, based on expectations that a modest rise of inflation in June in the U.S. might persuade the Federal Reserve to reduce its imposition of more rate hikes later this year.
Brent settled up 71 cents, or 0.9 percent, to $80.11 per barrel, while West Texas Intermediate settled up 92 cents, or 1.2 percent, to $75.75 per barrel.
A report from the Labor Department on Wednesday showed that consumer prices rose modestly in June and registered their smallest annual increase in more than two years; plus, underlying consumer prices posted their smallest monthly gain since August 2021 – all of which convinced investors that the tightening cycle by central banks was drawing to a close, even if banks as recently as last week promised more hikes were inevitable.
Naeem Aslam, chief investment officer at Zaye Capital Markets, said that despite traders' newfound optimism, "it is important to keep in mind that this is still a transitory situation."
Meanwhile, analysts puzzled over an Energy Information Administration report showing that gasoline inventories remained largely unchanged at 219.5 million barrels during theU.S. Fourth of July holiday week: Phil Flynn, senior market analyst at Price Futures Group Inc., said the situation was "almost unheard of" and pointed out that expectations were for a big draw as drivers embarked on holiday travel.
The EIA report also revealed a much bigger-than-expected U.S. crude stock build of nearly 6 million barrels last week; still, it noted that the global market is now expected to tighten in the second half and stockpiles are forecast to draw through 2024.
In other oil related news on Wednesday, U.S. energy secretary Jennifer Granholm told media of her country's Strategic Petroleum Reserve that has been drained of nearly 300 million barrels of oil since president Joe Biden first took office, "the bottom line is we are going to replenish."
However, an energy department spokesperson later informed media that "replenish" meant the goal was to recover 180 million barrels of emergency sales through a mix of cancelled future sales and new purchases, rather than completely refilling the SPR.
Also on Wednesday, it was reported that heavy trading in Dubai oil has lifted its premium to WTI crude to its highest since late March, a development that could make U.S. crude even more competitive in Asia (the intensification of Dubai trading came in the wake of escalating shipping rates and price hikes from Saudi Arabia).
