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Oil Prices Jump As U.S. Inflation Comes Below Expectations

  • U.S. Bureau of Labor Statistics presented lower-than-expected inflation figures for October.
  • Oil recouped earlier losses and WTI crude traded 1.5% higher at 08:00 AM CT.
  • A potentially slower pace of interest rate increases could reinvigorate economic growth and oil demand growth.

Oil prices erased earlier losses and moved higher on Thursday just after the U.S. Bureau of Labor Statistics released data for October showing that inflation in the United States last month was lower than expected.

Oil prices erased the small losses of the day after the cooler-than-expected inflation data and jumped by more than 1% as of 8:50 a.m. ET. The U.S. benchmark, WTI Crude, was up by 1.50% at $87.05, with the international benchmark Brent Crude, rallying 1.45% at $93.94.   

The U.S. Consumer Price Index for All Urban Consumers (CPI-U) rose by 0.4% in October from September, the CPI data showed. This compares with the expectation of a 0.6% increase in consumer prices month over month. 

Over the last 12 months, the CPI increased by 7.7% before seasonal adjustment, which again was lower than the 7.9% expected annual inflation for October.  

“The all items index increased 7.7 percent for the 12 months ending October, this was the smallest 12-month increase since the period ending January 2022,” the Bureau of Labor Statistics said.

Core CPI, that is, without the food and energy indexes, rose by 0.3% in October from September, compared to expectations of a 0.5% increase. For the 12 months to October, core inflation was at 6.3% versus the 6.5% expected by analysts.   

The lower-than-expected inflation data instilled confidence in the markets, including the oil market, that the Fed may have reasons to pivot from the aggressive interest rate hikes in recent months. A potentially slower pace of interest rate increases could reinvigorate economic growth and oil demand growth.

Speculation about a Fed pivot on interest rate hikes to tame inflation sent oil prices higher at the end of last week.

Today, the U.S. dollar slid after the inflation data, further boosting oil prices which typically have an inverse correlation to the greenback.  

By Julianne Geiger for Oilprice.com


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