Brent rises as US inflation data signals a final rate cut for 2024

The front-month ICE Brent contract has gained $1.48/bbl on the day, to trade at $73.98/bbl at 09.00 GMT.

PHOTO: Black crude oil barrels. Getty Images

Upward pressure:

Brent crude price has moved higher on the day following the latest US inflation data, which came in “hot”.

The US inflation rate, based on the Consumer Price Index (CPI), rose by 0.3% in November, edging up from the 0.2% increase recorded in the previous month, according to the US Bureau of Labor Statistics (BLS).

On an annual basis, the CPI increased to 2.7% in November, up from 2.6% in October and matching market expectations.

Oil prices have reacted positively to the data as it opened the window for a final interest rate cut by the US Federal Reserve (Fed) this year, as it tries to bring inflation under its 2% target.

“US CPI numbers yesterday would have only reinforced the view that the Fed will likely cut interest rates by 25bp [basis points] at its meeting this month,” two analysts from ING Bank said.

Meanwhile, Washington is considering fresh sanctions on Russia’s crude oil, according to media reports. The new sanctions could move Brent’s price higher, according to market analysts.

“Oil prices have been better supported recently on the back of reports that the US is potentially looking to impose further sanctions against Russia, which could target oil,” ING Bank’s analysts said.

Downward pressure

Oil prices felt some downward pressure after Saudi Arabia and its partners at OPEC+ reduced demand growth for the fifth consecutive month.

The Organization of the Petroleum Exporting Countries (OPEC) reduced its world oil demand growth forecast to 1.6 million b/d, about 210,000 b/d lower than its previous month's projection.

Total oil consumption in 2024 is expected to average 103.8 million b/d, OPEC said.

Looking ahead to 2025, OPEC forecasts global oil demand growth at 900,000 b/d, with total consumption reaching 105.27 million b/d. This represents a downward adjustment of 600,000 b/d compared to its prior estimate.

“These revisions do not come as a surprise as OPEC has been more aggressive than the rest of the market when it comes to demand,” ING Bank’s analysts said.

By Aparupa Mazumder

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