Oil props up on soft US inflation data

Brent crude’s price has moved higher following the release of the latest cooler-than-expected US inflation data for the third consecutive month.

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On an annual basis, the US inflation rate, based on the Consumer Price Index (CPI), increased to 2.3% last month, down from the 2.4% growth seen in March, according to the US Bureau of Labor Statistics (BLS).

“US inflation rose less than forecast in April amid tame prices,” ANZ Bank’s senior commodity strategist Daniel Hynes said.

Oil prices have reacted positively to the “relatively soft” inflation data. It opens the window for interest rate cuts by the US Federal Reserve (Fed) this year, as it tries to bring inflation under its 2% target, according to analysts.

Lower interest rates in the US can boost demand, making dollar-denominated commodities like oil cheaper for holders of other currencies.

Besides, the news was followed by a small slump in the US dollar value against other major currencies. “A weaker USD following a cooler-than-expected US consumer price index (CPI) provided some tailwinds to the oil market,” two analysts from ING Bank noted.

By Aparupa Mazumder

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