Brent moves higher on cooling US inflation

The front-month ICE Brent contract moved $1.01/bbl higher on the day, to trade at $86.27/bbl at 09.00 GMT.

PHOTO: Oil barrels. Getty Images

Upward pressure:

Brent’s price surpassed the $86/bbl mark due to cooling inflationary pressures in the world’s largest oil-consuming nation – the US.

Inflation growth in the US, measured by the change in the Consumer Price Index (CPI), declined from 3.3% year-on-year in May to 3% in June, data from the US Labour Department's Bureau of Labour Statistics (BLS) showed.

“Oil prices moved higher yesterday on the back of a weaker-than-expected US CPI print,” two analysts from ING Bank said.

This news has supported the global oil market’s expectations of a US Federal Reserve (Fed) interest rate cut in September. Lower interest rates in the US can make dollar-denominated commodities like oil more affordable, hence supporting demand growth.

“The US CPI data, which came in below expectations, has sent rate-cut ripples across global markets,” SPI Asset Management’s managing partner Stephen Innes remarked. “This better-than-expected inflation reading opens the door wide for a September rate cut from the Fed,” he added.

Besides, signs of robust demand growth during the summer travel season in the US have also bolstered the price of Brent today. “Crude oil prices gained as strong US summer demand continued to boost sentiment,” ANZ Bank’s senior commodity strategist Daniel Hynes said.

Downward pressure:

Brent’s price gain has been capped after the International Energy Agency (IEA) reiterated in its latest oil market report that it expects global oil demand growth to be below 1 million b/d this year as well as in 2025.

The Paris-based energy agency projects a sharp decline in the growth of the world's oil demand, from 2.3 million b/d in 2023 to 970,000 b/d this year. It projects that by 2025, oil demand growth will be nearly identical at 980,000 b/d.

China's declining oil consumption will impede global oil demand growth in 2024, according to the IEA. The country’s oil consumption contracted in April and May as its “post-pandemic rebound has run its course,” the energy agency said.

“Yesterday’s IEA oil market report has also failed to soothe concerns over Chinese demand,” ING Bank’s analysts said.

By Aparupa Mazumder

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