© Reuters. FILE PHOTO: A pump jack of Wintershall DEA is pictured in Emlichheim near the northern German city of Meppen, Germany, March 9, 2022. REUTERS/Fabian Bimmer
By Laila Kearney
NEW YORK (Reuters) -Oil prices rose by about $1 a barrel on Thursday, extending gains after figures showed U.S consumer prices unexpectedly fell in December, and supported by optimism over China’s demand outlook.
The U.S. consumer price index dipped 0.1% and suggested inflation was now on a sustained downward trend. Top oil importer China is reopening its economy after the end of strict COVID-19 curbs, boosting hopes of higher oil demand.
was $1.10, or 1.3%, higher at $83.77 a barrel by 1:28 p.m. ET (1828 GMT), having touched a high of $84.44, while U.S. West Texas Intermediate crude gained 78 cents, or 1%, to $78.19.
“By any metric, this number is much better than the previous reading and inflation is moving in the right direction, which should keep some pressure off the Fed,” said Naeem Aslam, analyst at Avatrade of the CPI data.
Both oil benchmarks jumped 3% on Wednesday driven by hopes that the outlook for the global economy may not be quite as pessimistic as has been feared.
“A softer landing for the U.S., and perhaps elsewhere, combined with a strong economic rebound in China following the current COVID wave could make for a much better year than feared and stimulate extra crude demand,” said Craig Erlam of brokerage OANDA before the CPI data was issued.
The market is also bracing for an additional curb on Russian oil supply due to sanctions over its invasion of Ukraine.
The U.S. Energy Information Administration said the upcoming EU ban on seaborne imports of petroleum products from Russia on Feb. 5 could be more disruptive than the EU ban on seaborne imports of crude oil from Russia implemented in December 2022.
Weakness in the U.S. dollar, which tumbled to a nearly 9-month low against the euro on after U.S. inflation data lifted expectations that the Federal Reserve will be less aggressive going forward with rate hikes, and strength in equities also supported crude prices, said Jim Ritterbusch of consultancy Ritterbusch and Associates.
Keeping prices from moving higher, however, was a hefty and unexpected jump in American crude oil inventories.
“Other than the China factor and recent lift in the equities amidst some weakening in the dollar, the complex doesn’t appear to possess much bullish impetus, especially when viewed within the context of transparent and product balances,” Ritterbusch said.
Crude inventories rose by 19 million barrels in the week ended Jan. 6 to 439.6 million barrels. Analysts polled by Reuters had expected a 2.2 million-barrel drop. [EIA/S]