Oil slides more than 2% on higher-than-expected US inflation
Commodities depreciated more than 2% on the day it was known that the US year-on-year inflation rate slowed to 8.3% in August. Still, the data came in above analysts’ expectations.
Oil prices in international markets are retreating more than 2%, pressured by inflation data in the US, which were above analysts’ expectations, raising fears of further interest rate hikes by the Fed.
By 6:32 p.m. At Lisbon time, Brent crude, which serves as a reference for national imports, was down 2.81 percent to $91.36, while WTI, traded in New York, depreciated by 2.98 percent to $85.16.
This performance comes on the day that the US Department of Labor revealed that the year-on-year inflation rate in the United States slowed to 8.3 percent in August, a 0.2 percentage point retreat from July and a retreat for the second consecutive month. In addition, with regard to the quarter-on-quarter change, the Consumer Price Index (CPI) in the US increased by 0.1% compared to July. Analysts consulted by Reuters had anticipated a 0.1% decline.
These data increase speculation that the Fed will maintain its aggressive positioning in raising interest rates and should proceed with a new rate increase at the next meeting, scheduled for September 20 and 21. “The Fed may have to raise rates faster than expected, which could cause ‘risk’ sentiment in oil and be more pronounced for the dollar,” Dennis Kissler, vice president of the markets section at BOK Financial, told Reuters. Remember that oil is generally priced in US dollars, so a stronger dollar makes the commodity more expensive for holders of other currencies.
Pressuring markets is also part of China’s continued containment measures following the zero COvid policy, as well as the reduction in stocks of “black gold” in the US strategic reserve. On Monday, the US Department of Energy revealed that US emergency oil stocks shrank to 434.1 million barrels in the week ending September 9. This is a drop of 8.4 million barrels on the previous balance sheet and represents the lowest level since October 1984, i.e., in almost 38 years.
Nevertheless, on Tuesday, the Organization of the Petroleum Exporting Countries (OPEC) maintained its forecasts for global oil demand for 2022 and 2023, signaling that world economies are responding better than expected, despite “headwinds” such as inflation.