Investing.com– Oil prices rose Wednesday, boosted by a benign US inflation report, which opened the potential for more Fed rate cuts, boosting economic activity.
At 09:00 ET (14:00 GMT), Brent Oil Futures rose 0.8% to $80.54 a barrel, while Crude Oil WTI Futures expiring in March gained 1.1% to $77.21 a barrel.
Core US CPI cooler than expected
US consumer prices rose in line with expectations in December, while an underlying measure was slower than anticipated, according to a closely-watched gauge of inflation that could play into the Federal Reserve’s interest rate policy plans.
The headline consumer price index increased by 0.4% last month, accelerating slightly from 0.3% in November, while during the twelve months through December, the CPI climbed by 2.9%, faster than the prior reading of 2.7%.
However, the so-called “core” measure, which strips out volatile items like food and fuel, came in at 0.2% month-on-month and 3.2% on the year, below November’s pace of 0.3% and 3.3%, respectively.
Tuesday’s December Producer Price Index (PPI) report also came in milder-than-expected, elevating concerns about inflationary pressures. The Federal Reserve has already projected just two rate cuts in 2025, with officials expressing concern over inflation remaining elevated.
Higher interest rates bode well for the U.S. dollar, and when the greenback appreciates against other currencies, it makes oil more expensive for buyers using other currencies.
The US Dollar Index has slipped back from its recent two-year peak.
Sanctions could impact supply flows – IEA
Oil had rallied at the start of this week and reached a four-month high on Monday after the Joe Biden administration introduced a comprehensive sanctions package aimed at cutting into Russia’s oil and gas revenues.
These expanded US sanctions could impact oil supply flows and distribution chains out of the country, according to a monthly report from the International Energy Agency.
Traders have focused in on the sanctions in recent days, with uncertainty surrounding how much Russian supply will be lost in the global market and whether the country’s major customers — particularly China and India — will need to find alternative sources to counter the shortfall.
“While it is too early to fully quantify the potential impact from these new measures, some operators have reportedly already started to pull back from Iranian and Russian oil,” the Paris-based agency said.
API reports smaller-than-expected decline in crude inventories
The American Petroleum Institute (API) report showed that U.S. crude inventories fell by about 2.6 million barrels for the week ended Jan. 10, compared with a draw of 4 million barrels reported by the API for the previous week. Economists were expecting a decline of 3.5 million barrels.
A smaller drawdown typically means that demand for crude oil may not be as high as anticipated, or that supply is more robust than expected.
Gasoline inventories rose by approximately 5.4 million barrels, while distillate stockpiles, including diesel and heating oil, expanded by 4.9 million barrels.
The official government report providing detailed inventory data is scheduled for release later in the day.
(Ayushman Ojha contributed to this article.)
This post is originally published on INVESTING.
