Oil moves higher following US inflation data

The front-month ICE Brent contract moved $2.11/bbl higher on Wednesday, to settle at $82.03/bbl following the latest US inflation data.

PHOTO: Green oil barrels and US dollar bills. Getty Images

The US inflation rate, based on the Consumer Price Index (CPI), rose by 0.4% in December, edging up from the 0.3% increase recorded in the previous month, according to the US Bureau of Labor Statistics (BLS).

On an annual basis, the CPI increased to 2.9% in December, up from 2.7% in November and matching market expectations.

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.

“Crude futures were extending gains… as a relatively tame US December consumer inflation figure spurred cheer and risk appetite in the financial markets,” VANDA Insights’ founder and analyst Vandana Hari 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

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