BERNAMA – Oil prices increased yesterday, driven by expectations of further United States (US) Federal Reserve (Fed) policy easing following lower-than-expected US inflation data, reported Anadolu Agency (AA).
The international oil benchmark of Brent crude increased by 0.20 per cent to USD72.79 per barrel at 11.40am, up from the previous session’s close of USD72.64.
The US benchmark West Texas Intermediate also rose by 0.17 per cent to USD69.59 per barrel, compared to USD69.47 at the close of the prior session.
Both benchmarks rose as a result of lower-than-expected inflation data in the US, which supported the expectation that the Fed would continue to loosen policy rates.
Macroeconomic data revealed that US consumer spending rose by 0.4 per cent in November, missing expectations. Personal incomes in the US grew by 0.3 per cent in November compared to the previous month.
The core personal consumption expenditures (PCE) price index, the Fed’s preferred inflation gauge excluding food and energy, increased by 0.1 per cent on a monthly basis and 2.8 per cent on an annual basis in November, falling short of expectations.
The Fed is expected to maintain higher policy rates for an extended period to curb inflation.
However, the recent lower-than-expected inflation data has alleviated market concerns following the Fed’s rate cut.
Remarks from Fed Presidents further reinforce the market’s view. Chicago Fed President Austan Goolsbee expects a shallower path of rate cuts in 2025, but inflation is generally slowing.
President of the New York Fed John Williams said he included President-elect Donald Trump’s policies in his forecasts, citing their significance in shaping the economic outlook.
San Francisco Fed President Mary Daly noted that she expects significantly fewer interest rate cuts next year than initially anticipated.
The decline in the US dollar index against major currencies also contributed to the rise in oil prices.
The US dollar index, which measures the value of the US dollar against a basket of foreign currencies, declined by 0.60 per cent yesterday, compared to Friday’s closing. This weaker dollar is expected to stimulate demand for oil by making it more affordable for those using foreign currencies.
Trading volumes in both US and European markets are anticipated to remain subdued throughout the week as market participants observe the festive holiday break.
