Brent moves higher following upbeat economic data from the US

The front-month ICE Brent contract gained $0.61/bbl on the day, to trade at $82.17/bbl at 09.00 GMT.

PHOTO: Oil barrels and a pumpjack. Getty Images

Upward pressure:

Brent futures moved higher after the US Federal Reserve (Fed) hinted at a rate cut this year at its two-day Federal Open Market Committee (FOMC) meeting, which concluded yesterday.

In another boost for oil prices, inflation in the US, measured by the change in the Consumer Price Index (CPI) data, declined from 3.4% in April to 3.3% year-on-year in May, data from the US Labor Department's Bureau of Labor Statistics (BLS) showed.

The US CPI annual reading for May was below the 3.4% increase that the market had anticipated. “The [oil] market appears to have focused on external developments, specifically US CPI data for May, which came in weaker than expected,” two analysts from ING Bank said.

The slightly lower CPI reading for May indicates that inflation in the US is gradually declining. It has reinforced expectations in the oil market for a sooner-than-anticipated reduction in interest rates by the US Federal Reserve (Fed). However, inflation in the US is still above the Fed's 2% target.

Lower interest rates make the greenback weaker for non-dollar holders, which can support demand growth for dollar-denominated commodities like oil.

Downward pressure:

A bigger-than-expected build in US crude stocks suggests that oil demand growth in the world’s largest oil-consuming nation might still be lagging below the market’s expectations. This has capped some of Brent’s price gains today.

Commercial crude oil inventories in the US rose by 3.73 million bbls to 460 million bbls in the week ending 7 June. The crude inventories have increased for the second consecutive week, according to EIA data released yesterday.

The weekly US commercial crude inventory data reported by the US Energy Information Administration (EIA) was “bearish”, according to the analysts from ING Bank.

Oil prices came under further pressure after the International Energy Agency (IEA) lowered its forecast for 2024 global oil demand growth to 960,000 b/d.

“The [oil market’s] mood wasn’t helped by a bearish market report from the International Energy Agency,” ANZ Bank’s senior commodity strategist Daniel Hynes said. “It [IEA] warned that oil supply will overwhelm the market in coming years as the shift away from fossil fuels causes demand to hit a plateau,” he added.

By Aparupa Mazumder

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