Oil futures: Crude prices extend gains as US inflation cools
Quantum Commodity Intelligence – Crude oil futures Wednesday were sharply higher, with markets shrugging off a surprise build in US inventories as focus switched to US inflation data, which came in below expectations.
June ICE Brent futures were trading at $87.25/b (1930 GMT) compared to Tuesday's settlement of $85.61/b and close to the 2023 peaks set in late January, having extended the previous session's 2% gains.
At the same time, May23 NYMEX WTI was trading $83.26/b versus Tuesday's close of $81.53/b, while May23/Jun23 tilted into backwardation.
Annual US inflation was at 5% while the month-on-month price rise was 0.1% in March, according to the Bureau of Labor Statistics, both figures coming in slightly below forecasts.
All eyes had been on US inflation figures ahead of the CPI report, which will signal what further action the Federal Reserve will need to take in the form of rate hikes in its battle to contain rising costs.
New York Fed President John Williams indicated Tuesday the central bank might only need one more 25 basis point rate rise, while the Dollar Index so far this week has bounced between 102 and 102.50 points amid rate speculation.
"Recession fears are also on the rise after a series of weaker-than-expected data points in recent weeks. However, signs that US inflation is cooling by more than expected could help rein fears of another rate hike and recession worries," said City Index analyst Fiona Cincotta.
Inventories
Oil markets batted away American Petroleum Institute data released late Tuesday, which revealed an unexpected increase in US commercial crude inventories of 377,000 barrels last week.
API data also showed gasoline increased by nearly 450,000 barrels, although distillate stocks posted a 2 million barrel draw.
Likewise, data from the Energy Information Administration released Wednesday showing a 600,000 bpd rise in crude stocks was largely shrugged off.
Oil markets also proved resilient after the IMF trimmed its growth outlook for both this year and next. The IMF said it sees global GDP expanding 2.8% this year and 3% in 2024, each down 0.1% from the previous forecast in January.
Meanwhile, the US Energy Information Administration (EIA) increase its oil price forecasts by 2.5% for 2023 after OPEC+ cut output by around 1.15 million bpd.
The EIA hiked its Brent outlook to $85/b in 2023, up $3 from its March projections, while boosting WTI from $77.10/b to $79.24/b.
However, it lowered its Henry Hub natural gas price forecast from $3.02/mmBtu to $2.94/mmBtu.
