Oil prices inch higher with U.S. inflation, EU recession in focus

By OXShare

Asian trade on Tuesday saw a slight increase in oil prices, with the gains continuing from a report by the Organization of Petroleum Exporting Countries that alleviated worries about a decline in demand.

The price of crude oil was somewhat boosted by the United States purchasing 1.2 million barrels of oil to replenish the Strategic Petroleum Reserve. Additionally, news of stricter regulations on Russian oil exports suggested tighter conditions in the oil market.

However, the increase in oil prices was not as significant because traders adopted a cautious approach in anticipation of an important U.S. inflation report that is expected to heavily influence the direction of interest rates in the upcoming months.

There was also anticipation for a report on third-quarter economic growth in the euro zone, particularly as the region is at the brink of experiencing a recession.

At 20:58 Eastern Time (05:58 Greenwich Mean Time), the price of Brent oil futures increased by 0.1% to reach $82.77 per barrel. Likewise, the price of West Texas Intermediate crude futures also rose by 0.2% to reach $78.44 per barrel.

Both contracts have experienced significant declines in value during the past three weeks, mainly due to worries about low demand following a series of disappointing economic reports from China, the United States, and the euro zone.

The emphasis is on the inflation of the US CPI and the recession in the EU.

The market’s attention has shifted towards the upcoming release of the U.S. consumer price index data, following a series of confident remarks made by Federal Reserve officials earlier in the week.

Federal officials indicated that future increases in interest rates will depend mainly on inflation. It is anticipated that the data for Tuesday will reveal a decrease in CPI inflation for the month of October, following two months of exceeding expectations.

If there are any indications of inflation cooling down, it would be seen as a positive development for the crude markets. This is because it suggests that there will be fewer opportunities for the Federal Reserve to increase interest rates in the upcoming month.

On Tuesday, along with the U.S. data, there will also be the release of euro zone gross domestic product data. The main concern is whether the bloc experienced a technical recession in the third quarter. There have been worries about a potential recession this year, especially due to weak economic indicators from Germany, which is the largest economy in the bloc.

It is predicted that the Gross Domestic Product (GDP) of the Eurozone declined by 0.1% from the previous quarter between July and October 30th.

The monthly report from OPEC suggests that concerns about a decrease in demand should not be taken too seriously.

The monthly report released by OPEC aided in stabilizing oil prices this week, as the organization attributed the decline in crude prices to speculators and emphasized that there is still a robust demand for oil.

The cartel raised its prediction for demand for the year, and kept its forecast for demand in 2024 unchanged, primarily attributing this to the robust demand in China following the easing of COVID restrictions in early 2023.

Before a meeting on November 26th, the report from OPEC serves as the organization’s last statement on oil markets. The meeting will mainly revolve around the discussion of whether important oil producers such as Russia and Saudi Arabia will maintain their current supply reductions until 2024.