Oil Market Grows on Positive Inflation Signal, Supply Factor

By Adedapo Adesanya

The oil market improved by more than 1 per cent on Friday to record its second-straight week of gains, as supplies tightened in some parts of the world and US inflation data indicated price rises were slowing.

Brent futures grew by $1.29 or 1.6 per cent to $79.89 a barrel, as the US West Texas Intermediate crude (WTI) increased by $1.30 or 1.8 per cent to $75.67 a barrel.

Data on Friday showed the US Personal Consumption Expenditure (PCE) index, the Federal Reserve’s preferred inflation gauge, rose 0.3 per cent in February on a monthly basis compared with a 0.6 per cent rise in January.

On a 12-month basis, core PCE increased 4.6 per cent, a slight deceleration from the level in January. Including food and energy, headline PCE rose 0.3 per cent monthly and 5 per cent annually, compared with 0.6 per cent and 5.3 per cent in January.

The softer-than-expected data came with monthly energy prices in the world’s largest economy decreasing by 0.4 per cent while food prices went up by 0.2 per cent, with goods prices climbing 0.2 per cent and services increasing 0.3 per cent.

In other data from the report, personal income rose 0.3 per cent, slightly above the 0.2 per cent estimate. Consumer spending climbed 0.2 per cent, compared with the 0.3 per cent estimate.

This points to the fact that inflation and supported oil prices could point to less aggressive interest rate hikes from the US central bank, lifting investor demand for risk assets like oil.

Oil prices were also buoyed after producers shut in or reduced output at several oilfields in the semi-autonomous Kurdistan region of northern Iraq following a halt to the northern export pipeline.

Since Saturday, Iraq has been forced to halt around 450,000 barrels per day of crude exports, or half a per cent of global oil supply, from the Kurdistan region (KRI) through a pipeline that runs from its northern Kirkuk oil fields to the Turkish port of Ceyhan.

Turkey stopped pumping Iraqi crude from the pipeline after Iraq won an arbitration case in which it said Turkey had violated a joint agreement by allowing the Kurdistan Regional Government (KRG) to export oil to Ceyhan without Iraq’s consent.

The Organisation of the Petroleum Exporting Countries and allies (OPEC+) led by Russia are likely to stick to their existing output deal at a meeting on Monday.