Oil inches up following US inflation data

The front-month ICE Brent contract inched $0.39/bbl higher on Wednesday to settle at $72.28/bbl following the latest US inflation data.

PHOTO: Getty Images

The US inflation rate, measured by the change in the Consumer Price Index (CPI), came in flat at 0.2% in October, matching the previous month's figure, the US Labor Department's Bureau of Labor Statistics (BLS) reported yesterday.

However, in the 12 months to October, the CPI rose to 2.6%, up from 2.4% growth recorded in September.

The oil market has reacted positively to the inflation data as the reading is gradually approaching the US Federal Reserve's (Fed) 2% target, with some analysts expecting a final interest rate cut this year.

“Inflation data that landed right on target was a breath of fresh air for [oil] traders navigating the recent chaos of unpredictable economic indicators,” SPI Asset Management’s managing partner Stephen Innes said.

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

“The news brought a wave of optimism, especially as it nudged the odds for a December rate cut up to 80%,” Innes added.

By Aparupa Mazumder

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