Brent futures for April delivery settled at $83.62 a barrel, down 6 cents and U.S. crude settled at $78.26 a barrel, dropping 28 cents
Oil prices dropped on Thursday as U.S. inflation data implied a softening of the world’s largest economy that could lower crude demand, with increasing OPEC production also weighing on prices.
Brent futures for April delivery settled at $83.62 a barrel, down 6 cents. U.S. crude settled at $78.26 a barrel, dropping 28 cents.
The Fed’s preferred inflation gauge, the U.S. PCE index, showed January inflation in line with economists’ expectations, keeping a June interest rate cut on the table.
The economic data, which is mixed, is helping to argue for interest rate cuts for the Federal Reserve, which is supportive of oil demand, according to John Kilduff, partner with Again Capital LLC.
At the same time, those cuts are going to come because the economy is slowing and that impacts oil demand, he added.
Reports on consumer and producer prices earlier in February indicated sticky inflation and a guarded approach from Fed policymakers, which prompted investors to push back expectations of interest rate cuts to June from March.
Euro zone inflation slipped further this month, strengthening the case for the ECB to start easing rates later this year, according to data from some of the region’s biggest economies.
High interest rates have served many major Western economies to curb inflation, potentially reducing economic growth and oil demand.
On the supply side, crude inventories in the U.S., the world’s top producer, have increased for a fifth successive week, rising 4.2 million barrels, official data showed on Wednesday, surpassing predictions of a 2.7 million-barrel build.
An extension to voluntary oil output cuts from the OPEC+ producer group was also on the table.
With the demand outlook remaining uncertain, we think OPEC will extend the current supply agreement to the end of the second quarter, ANZ analysts stated in a note.
