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Tom Kool

Tom Kool

Tom majored in International Business at Amsterdam’s Higher School of Economics, he is Oilprice.com's Head of Operations

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Oil Prices Maintain Losing Streak on Inflation Confusion

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The U.S. crude oil benchmark, West Texas Intermediate (WTI) has fallen well below the $80 mark it surpassed at the beginning of the week, with Brent crude also losing ground around $82 per barrel as inflation concerns once again took center stage. 

At 1:45 p.m. ET on Wednesday, WTI was trading down 0.92% on the day, trading at $77.94, while Brent crude was trading down 0.81% at $82.21 per barrel.

On Tuesday, the Federal Reserve put the brakes on oil prices when it suggested waiting months longer before implementing any rate cuts as inflation figures fail to paint a clear picture. 

The Fed is looking for indications that inflation is fully on track to fall to 2% prior to any rate cuts that analysts had hoped would come as soon as June or July.

"The Federal Open Market Committee (FOMC) minutes will be scrutinized for the Fed's assessment of bumpy Q1 inflation and clues on the timing and extent of potential interest rate cuts in 2024," ANZ analysts said in a report cited by Reuters on Wednesday. 

Lower interest rates typically reduce borrowing costs and often lead to an increase in industrial activity and, hence, energy consumption. 

Interest rates continue to fall, but the decline is not fast enough for analysts to be assured of rate cuts this summer. At the same time, the Fed’s unwillingness to cut rates essentially helps keep inflation higher by holding down consumer spending. 

Last week, economic data presented very mixed signals for traders in crude oil, with the producer price index (PPI) rising 0.5% in April, which indicates inflationary pressure, contrasted with the consumer price index (CPI), which met expectations with a modest 0.3% rise, suggesting inflation is easing. 

Oil prices are responding to these mixed inflationary signals, against a backdrop of perceptions among analysts that demand is weakening. Speaking to traders and analysts earlier this week, Reuters reported that refiners were buying less crude, when the expectation is that they would be buying more due to increasing refinery capacity.

By Tom Kool for Oilprice.com

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  • George Doolittle on May 23 2024 said:
    Obviously natural but nor is oil....or the USA automotive Industry... *NOT* recession proof...nor are electricity futures which are now negative out West apparently to go with negative natural gas prices. Still the US economy has expanded in a manner that allows for the US economy to take advantage of these price collapses thus creating entire Industries even such as battery electric for factors, aircraft production for consumer use, more benign goods such as grills as lawnmowers...lots of open outcry en route anyways but still USA making brand new sheet metal too.

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