Oil gains following latest US inflation data

The front-month ICE Brent contract moved $2.82/bbl higher on Thursday to settle at $79.40/bbl amid signs of cooling US inflation.

PHOTO: US dollar bills. Getty Images

The US inflation rate, measured by the change in the Consumer Price Index (CPI), rose to 2.4% in 12 months to September, down from 2.5% growth in August, the US Labor Department's Bureau of Labor Statistics (BLS) reported on Thursday.

On a monthly basis, the CPI came in flat at 0.2% in September, matching August’s figures. The oil market has reacted positively to the inflation data, with Brent’s price nearing $80/bbl.

The inflation reading is gradually approaching the US Federal Reserve's (Fed) 2% target, which raises expectations of another interest rate cut this year.

“On the inflation front, the silver lining is… inflation is finally cooling,” SPI Asset Management’s managing partner Stephen Innes remarked. “The [US] central bank is still on track to keep easing—though maybe not at the same breakneck pace,” he added.

Lower interest rates in the US can boost demand, making dollar-denominated commodities like oil cheaper for holders of other currencies.

“With the Fed laser-focused on keeping labour market gains [US job market growth] intact, the path of least resistance still points to rate cuts,” Innes added.

By Aparupa Mazumder

Please get in touch with comments or additional info to news@engine.online