US crude prices above $90/bbl ignite inflation worries

Must read

Africa’s largest economy is battling a currency crisis and soaring inflation

IBADAN, Nigeria - Feb. 19, 2024: Demonstrators are seen at a protest against the hike in price and hard living conditions in Ibadan on...

Turkey is back in from the cold with NATO and F-16 moves, but thorny issues remain

President of Turkey Recep Erdogan addresses journalists during the final national press conference during the high level NATO summit in Litexpo Conference Centre in...

Shares of supplier TSMC, chip equipment maker ASML fall ahead of Nvidia’s earnings report

A laptop keyboard, a binary code reflected and Nvidia logo displayed on a phone screen are seen in this illustration photo taken in Krakow,...

Skull and Bones, Singapore’s first major video game title, launches to mixed reviews

Justin Farren, Creative Director at Ubisoft Singapore, reveals "Skull & Bones" during the Ubisoft E3 conference at the Orpheum Theater on June 11, 2018...

US crude prices above $90/bbl ignite inflation worries © Reuters. Storage tanks are seen at Marathon Petroleum’s Los Angeles Refinery, which processes domestic & imported crude oil into California Air Resources Board (CARB), gasoline, diesel fuel, and other petroleum products, in Carson, California, U.S., March 11, 2022

By Arathy Somasekhar

HOUSTON (Reuters) – Crude oil prices above $90 a barrel in the United States stirred worries that inflation could rise further in an economy where the Federal Reserve has already hiked interest rates steeply to control rising prices.

Higher oil prices are a burden on global economies, raising costs for transportation and manufacturing while pressuring consumer spending. President Joe Biden’s administration last week polled oil refiners about operating plans, a sign of concern about gasoline prices and fuel supplies.

U.S. West Texas Intermediate crude (WTI) for October delivery rose 1.9% on Thursday to settle at $90.16, the first close above $90 since Nov. 2022, as traders bet oil supplies would remain tight for the rest of the year.

“The rally in crude will eventually be met with demand destruction,” said Dennis Kissler, senior vice president of trading at BOK Financial. “I’m just not sure if that will be $90 oil or $100 oil that tips the scale.”

Oil prices could reach $100 per barrel by the end of the year, some market participants predict. International futures settled at $93.70 a barrel on Thursday, their highest this year. [O/R]

More expensive oil prices are pinching drivers at the pump. U.S. consumer inflation in August increased by the most in 14 months on high fuel costs. Gasoline accounted for more than half of the increase in the Consumer Price Index.

OPEC OUTPUT CUTS

Oil supplies are tightening with top OPEC+ producers Saudi Arabia and Russia extending 1.3 million barrel per day output cuts through year-end. production has also flattened in recent months on a 17% drop in drilling rigs in the last 52 weeks.

Traders are bidding up near-term supplies, a factor likely to reduce U.S. oil inventories as refiners run plants at high levels to meet strong demand for gasoline and diesel.

WTI futures for October delivery traded as much as $9.15 a barrel above crude to be delivered in October 2024. That was the highest premium since November 2022.

Higher prices in the near term prompt traders to sell oil immediately rather than store it.

“There is absolutely no incentive to store oil in a tank,” said John Kilduff, partner at New York-based hedge fund manager Again Capital.

The U.S. consumer and China’s energy demands remain a wild card for oil pricing. U.S. demand has remained strong even as fuel prices rise. China has boosted liquidity to support the country’s economic recovery.

More articles

Latest article

Africa’s largest economy is battling a currency crisis and soaring inflation

IBADAN, Nigeria - Feb. 19, 2024: Demonstrators are seen at a protest against the hike in price and hard living conditions in Ibadan on...

Turkey is back in from the cold with NATO and F-16 moves, but thorny issues remain

President of Turkey Recep Erdogan addresses journalists during the final national press conference during the high level NATO summit in Litexpo Conference Centre in...

Shares of supplier TSMC, chip equipment maker ASML fall ahead of Nvidia’s earnings report

A laptop keyboard, a binary code reflected and Nvidia logo displayed on a phone screen are seen in this illustration photo taken in Krakow,...

Skull and Bones, Singapore’s first major video game title, launches to mixed reviews

Justin Farren, Creative Director at Ubisoft Singapore, reveals "Skull & Bones" during the Ubisoft E3 conference at the Orpheum Theater on June 11, 2018...

Want steady, passive income? Buy these dividend stocks with higher yields, Wall Street says

Dividend stocks often appeal to investors who want steady income and long-term growth. And 2024 is shaping up to be a good year for...