Oil loses momentum following US inflation data

Oil prices have come under pressure following the latest US inflation data released by the US Bureau of Labor Statistics (BLS).

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The US inflation rate, based on the Consumer Price Index for all urban consumers (CPI-U), increased by 0.3% in June, after rising by 0.1% in May.  

On an annual basis, the US CPI advanced 2.7% last month, more than the 2.4% growth seen in May.

Oil prices have moved lower following the inflation data, as it reduces the likelihood of interest rate cuts by the US Federal Reserve (Fed) this year, with the central bank remaining focused on bringing inflation down to its 2% target, according to analysts.

“The CPI winds are shifting, and the Fed, caught between a slowing economy and an inflation forecast thick with geopolitical fog, may soon find itself short on safe harbours,” said SPI Asset Management managing partner Stephen Innes.

Higher interest rates in the US can dampen demand, making dollar-denominated commodities like oil more expensive for holders of other currencies.

By Aparupa Mazumder

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