Crude Oil Lower After CPI Jump; OPEC Remains Upbeat

© Reuters

By Peter Nurse   

Investing.com — Oil prices weakened Thursday, as a strong U.S. inflation report boosted the dollar, but losses are limited following an upbeat view of global demand by OPEC. 

By 9:15 AM ET (1415 GMT), U.S. crude futures traded 0.1% lower at $89.57 a barrel, while the Brent contract fell 0.1% to $91.44.

U.S. Gasoline RBOB Futures were up 0.3% at $2.6612 a gallon.

The U.S. consumer price index gained 0.6% last month, up 7.5% on the year, the biggest year-on-year increase since February 1982.

This big jump could fuel speculation that the Federal Reserve will hike interest rates by 50 basis points in March, resulting in the dollar index climbing 0.5% to 95.927. A stronger dollar makes commodities prices in the greenback, including crude, more expensive for foreign buyers.

Still, losses are limited as the Organization of the Petroleum Exporting Countries said it expected world oil demand to rise by 4.15 million barrels a day this year in its monthly report earlier Thursday. 

While this was unchanged from its forecast last month, the cartel added there was upside potential to its forecast for world oil demand in 2022 as the global economy posts a strong recovery from the coronavirus pandemic.

“As most world economies are expected to grow stronger, the near-term prospects for world oil demand are certainly on the bright side,” OPEC said.

The market had received a boost Wednesday on an unexpected drop in U.S. crude stocks, suggesting demand has remained strong in the largest consumer of oil in the world. 

U.S. crude inventories fell 4.8 million barrels in the week to Feb. 4, according to the Energy Information Administration, dropping to the lowest levels since October 2018.

In addition, tensions remain high in Eastern Europe, with British Prime Minister Boris Johnson saying earlier Thursday that the West could face the “most dangerous moment” in its standoff with Moscow in the next few days, as Russia held military exercises in Belarus and the Black Sea following its troop buildup near Ukraine.

Elsewhere, traders continue to closely watch the nuclear talks between the West and Iran which resumed this week. A deal could lift U.S. sanctions on Iranian oil, and could thus return more than one million barrels per day, equating to more than 1% of global supply, to the market.

That said, Goldman Sachs (NYSE:GS) estimates that if a deal with Iran was signed next month, it would take until the third quarter for enough Iranian oil to come on the market to impact prices.