Oil Price Rises and Awaits US Inflation: What Could Happen?
The rise of oil prices: what’s driving the increase?
Today, the price of oil is on the rise, with Brent and WTI prices increasing to $83 and $78 per barrel respectively.
Crude oil is gaining ground on the back of expected higher demand, coupled with a weakened US dollar and reports showing decreases in crude oil and gasoline inventories in the United States.
Factors influencing oil prices
Various factors are influencing the surge in oil prices today, steering them upward.
Firstly, US crude oil inventories have reportedly decreased by 3.104 million barrels in the week ending on May 10, according to market sources citing data from the American Petroleum Institute.
The US government inventory data, set to be released later, is expected to show a similar decline as refineries ramp up activities to meet the increased fuel demand ahead of the peak summer driving season.
Expectations of another drop in US oil inventories are likely to support oil prices, as stated by ANZ Research.
Concerns regarding the supply of Canadian oil, a major exporter to the US, have also propped up prices.
Additionally, the weaker US dollar and stimulus measures from China have lent support to oil prices, making dollar-denominated oil cheaper for investors holding other currencies.
OPEC+ production cuts and global oil prices
This year, crude oil has gained ground as OPEC+ has reduced production to prevent oversupply and bolster global prices.
As the decision whether to extend output curbs looms ahead of the June 1 meeting, members grapple with the challenging task of determining how much crude they can pump.
The possibility of easing OPEC+ limits within the year remains uncertain, given Saudi Arabia’s incentive for higher prices to rebalance its budget, as highlighted by Vishnu Varathan from Mizuho Bank Ltd.
However, this may lead to tense OPEC+ dynamics as other members seek to boost production.
Impact of US inflation on oil prices
Lastly, oil prices are also susceptible to the US inflation reading expected at 14:30 Italian time.
US Consumer Price Index (CPI) data should provide a clearer indication of whether the Federal Reserve can cut interest rates by year-end, potentially stimulating the economy and increasing fuel demand.
