On Thursday, oil prices climbed over $83 by the barrel, increasing from explicit declines triggered by concerns that rising U.S. inflation could provoke Washington to deliver more strategic crude stockpiles to drive down prices.
Brent crude futures improved 70 cents, or 0.85%, to $83.34 per barrel by 0956 GMT. U.S. West Texas Intermediate (WTI) futures advanced 79 cents, about 1%, to $82.13.
Wednesday’s data recording U.S. inflation rose at the quickest rate in 30 years had driven the dollar higher and sent Brent and WTI crude down by 2.5% and 3.3%, individually. Further pressure was affected by a surge in U.S. oil stocks following a government announcement of some strategic reserves. [EIA/S]
According to Edward Moya, the senior analyst at OANDA, crude prices are trying to recover their footing following yesterday’s slide. Meanwhile, runaway inflation in America adds pressure on the Biden administration to tap the Strategic Petroleum Reserve (SPR).
Energy traders understand that an SPR announcement will only pass a very short-term drop in prices that will not help the American consumer.
Biden asked to push back on the market
Data on Wednesday showed U.S. consumer inflation at 6.2%, primarily driven by higher energy prices. That boosted the dollar’s potential for higher interest rates and more fixed monetary policy to control inflation. The oil usually trades inversely to the dollar.
U.S. President Joe Biden declared he requested the National Economic Council to decrease energy prices and the Federal Trade Commission to drive back on market manipulation in the energy sector to reverse inflation.
The Brent crude price has increased higher than 60% this year. It scored a three-year high of $86.70 on Oct. 25. It was backed by increasing demand and supply restraint by OPEC+.
Still, oil prices seem to be binding under $85 per barrel, Norbert Rucker, head of economics at Julius Baer, asserted in a note.
We could be staring at early signs of a fundamental transition towards an easing market, not limited as oil demand should only increase gradually, going ahead with the pick-up in U.S. shale and petro-nation supply.