Commodities Week Ahead: Bulls Seek to Defend $90 Oil as US Inflation Data Dawns
Surfing on Saudi-Russian production cuts, oil bulls will be seeking to defend the high price of $90 per barrel this week even with U.S. inflation data forecast to show a climb for a second straight month that could prompt the Federal Reserve to consider a more aggressive stance on interest rates.
Economists expect the August reading for the Consumer Price Index, due on Wednesday, to show a year-on-year increase of 3.6%. In July, the so-called CPI had risen to 3.2% from a previous reading of 3% for June.
Until then, inflation had been on a decline for most of the past year after hitting a four-decade high of 9.1% in June 2022.
Oil prices had risen from May lows of beneath $65 to above $88 for a barrel of U.S. West Texas Intermediate, or WTI, crude in last week’s trading.
Brent, the global benchmark for oil, rose from below $72 to above $92 within the same three-month span.
High energy prices are one of the biggest drivers of inflation. If the CPI continues to rise, it could embolden the Federal Reserve to do more rate hikes than initially anticipated by economists.
Recent signs of resilience in the U.S. economy — particularly in inflation and the labor market — pushed up concerns that the Fed will have enough headroom to keep interest rates higher for longer.
Markets fear that this trend could spur more cooling in the U.S. economy, potentially denting crude demand. U.S. fuel demand is also expected to cool in the coming months, with the end of the travel-heavy summer season.
The Fed has vowed to bring inflation back to its long-term target of 2% from the 3%-plus levels the CPI is hovering at. The central bank has already added 5% to interest rates over the past 18 months.
While most economists do not expect the Fed to
Read more on investing.com
