Oil gains on soft US inflation data

Brent crude’s price has moved higher following the release of the latest cooler-than-expected US inflation data for the fourth consecutive month.

IMAGE: An oil refinery installation in Southern California adorned with the US flag. Getty Images

The US inflation rate, based on the Consumer Price Index (CPI), increased by 0.1% in May, after increasing by 0.2% in the previous month, according to the US Bureau of Labor Statistics (BLS).

On an annual basis, the US CPI advanced 2.4% last month, slightly more than the 2.3% growth seen in April.

The recent weakness in energy prices has helped to keep the headline CPI low in May, according to the BLS.

“May’s CPI showed a cooler core reading,” SPI Asset Management managing partner Stephen Innes said. “The soft CPI print added fuel to calls for Fed rate cuts,” he added.

Oil prices have reacted positively to the “relatively soft” inflation data. It opens the window for interest rate cuts by the US Federal Reserve (Fed) this year, as it tries to bring inflation under its 2% target, according to analysts.

“In other words, no surprises, no inflation panic, and nothing standing in the way of summer rate-cut bets,” Innes said.

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

By Aparupa Mazumder

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