After staging a healthy uptrend this week, the prices of crude oil stabilized on Thursday after the release of weak US inflation data. According to experts, the recent PPI reading from the USA reveals that the campaign of interest rate hikes is close to the end.
The US crude futures were last seen trading near $75.67 per barrel with a 0.1% decline, while the Brent crude futures were trading at $80.16 per barrel with a 0.1% increase.
Crude Benchmark Index Gained 5% This Week
If we look at the crude oil benchmarks performance on a week-to-date basis, both (WTI & Brent) are up by 5% and are currently testing the 3-month highs.
The highlight behind this development in the oil markets can be attributed to the US PPI reading, which eased more than the market expectations. As per the data, the U.S. producer prices reduced during June, which took the annual inflation down by 0.1%.
In addition, the annual increase in US consumer prices was also one of the smallest if we look at the data from the last 2 years. This tells us that the inflationary pressure in the US economy is slowly fading away.
The recent decline in the PPI has also renewed hopes that the Fed will step back from its current policy. But for this month, the chances of a rate hike are very high which tells us that a pause in the campaign may happen at the next meeting after July.
According to one analyst, the recent data will not change the Fed's decision to rate hikes at the next meeting. However, this has raised the question of whether the Fed will step away from further tightening after this meeting or not!
Just a week ago, oil prices received a boost when the top oil-producing countries (Russia & Saudi Arabia) announced output cuts in August.
Now that the oil prices are at multi-month highs, there's a good chance that we will see some profit taking which will push the oil prices lower.