Brent breaks above $80/bbl after almost three months

The front-month ICE Brent contract has inched up by $0.47/bbl on the day, to $80.17/bbl at 09.00 GMT.

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Upward pressure:

Brent futures have continued to gain upward momentum after a key US consumer price inflation (CPI) report showed both headline rates and core rates (excluding food and energy) rose by 0.2% month-on-month in June. The report came from the US Labor Department.

The CPI increase undershot an expected rise of 0.3%, said ING’s market analyst James Knightley. “This means the annual rate of inflation [in the US] slows,” he added in a note.

A slowdown in the annual rate of inflation might stop the US Federal Reserve (Fed) from hiking interest rates further, which could boost the economy and subsequently oil demand.

“Brent has finally broken out of the range it has spent almost two months trading in,” said ING’s market analyst Warren Patterson. “The key catalyst for the move was the US CPI data coming in below consensus,” he further added.

Downward pressure:

Brent felt some downward pressure after the US Energy Information Administration (EIA) reported a big crude inventory build in the US. Commercial US crude oil inventories increased by 5.95 million bbls in the week that ended 7 July, which was much higher than the 3 million-bbl figure reported by the American Petroleum Institute on Tuesday.

Lower exports of US crude oil have led to this unexpected build, commented Warren Patterson. “The report was on the bearish side, given the large builds and weaker implied demand. However, clearly the market was more focused on US CPI data yesterday,” he further added.  

By Aparupa Mazumder

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