Sibel Morrow
10 January 2024•Update: 10 January 2024
ANKARA
Both oil benchmarks saw modest rises on Wednesday, fueled by optimism over US demand, as investors braced for impending economic data signaling the Federal Reserve's (Fed) next policy shift, despite the robust US dollar capping gains.
The international benchmark crude Brent traded at $77.84 per barrel at 0717 GMT, a 0.32% increase from the closing price of $77.59 a barrel in the previous trading session on Tuesday.
The American benchmark, West Texas Intermediate (WTI), traded at the same time at $72.53 per barrel, up 0.40% from Tuesday's close of $72.24 per barrel.
The American Petroleum Institute (API) late Tuesday announced an estimated decline of nearly 5.2 million barrels in US crude oil inventories, against the market expectation of a draw of 1.2 million barrels.
If the US Energy Information Administration (EIA) confirms the stock fall when it releases actual oil stock data later on Wednesday, prices are expected to rise further in the hopes of strengthening demand in the world’s largest oil-consuming country.
Investors are also keenly awaiting the US Bureau of Labor Statistics' release of the December Consumer Price Index (CPI) on Jan. 11. This critical indicator of consumer inflation could heavily influence the Federal Reserve's upcoming interest rate decisions.
In their latest meeting in December, the Federal Open Market Committee (FOMC) acknowledged that the central bank had made clear progress on cooling inflation. However, officials noted that inflation was still above the committee's longer-run goal and that there was a risk that progress toward price stability could stall as inflation approaches the Fed's 2% target.
The Fed's decisions will be data-dependent, with a focus on inflation and economic indicators. Fed officials, meanwhile, are signaling a potential shift towards rate cuts this year, depending on the trajectory of inflation and economic data.
The Fed's next meeting will be held on Jan. 30-31, and experts expect the policymakers' approach to be careful and data-dependent.
Meanwhile, the strengthening dollar has played its part in restraining crude oil gains. Higher US yields and the country's robust economic performance have bolstered the dollar's value, which in turn is making oil, priced in dollars, more expensive for holders of other currencies.
Further dampening oil price momentum is Saudi Arabia's strategic move to cut its crude oil prices by $2 a barrel for its Asian clients, a response to calls for more competitive pricing amid intense rivalry in the region.
