Oil Soars Again on Macro Risk Trade; ‘Peak Inflation’ Talk Weighs on Dollar By Investing.com

© Reuters

By Barani Krishnan

Investing.com — Crude prices recovered a third of what they lost in the first three days of the week after a large risky trade in markets on Thursday also boosted oil.

The rally came as the dollar fell for the first time in a week on speculation that US inflation figures may have peaked, despite the Federal Reserve appearing ready to pile on more inflation hikes. rate on the economy.

“It’s big macro trading, rather than what’s improved with oil per se,” said John Kilduff, a partner at New York-based energy hedge fund Again Capital, referring to the nearly 1,000 points in the l Wall Street index at the highest of the day.

Trading in New York stood at $1.84, or 2.1%, at $89.11 a barrel, after falling nearly 7% Monday through Wednesday. The previous week, the benchmark for U.S. crude rose 17%, in a strong start to October, after falling 12.5% ​​in September and losing 24% in the third quarter.

Trading in London was down $2.12, or 2.3%, at $94.57 a barrel, after falling 7% in the first three days of the week. Brent rose 11% the previous week, reversing all of its September loss and partially recovering from its 22% drop in the third quarter.

The , which pits the greenback against the euro, yen, pound, Canadian dollar, Swedish krona and Swiss franc, fell for the first time in seven days after hitting a two-week high. at 113.835. Technical charts, however, suggest the index could still hit 120 in the coming weeks, putting renewed pressure on crude and other dollar-denominated commodities.

US bond yields, pegged to the , also remained higher on Thursday, supporting a possible rebound in the dollar.

The dollar fell on Thursday despite the latest inflation data from the Labor Department suggesting the Fed was still far behind in its fight against price pressures.

The United States rose 0.6% in September, double economists’ estimates and four times more than in August, according to Labor Department data.

The Fed has struggled to contain inflation for more than a year now, with the annual CPI rate remaining near a 40-year high of 9.1% in June. The central bank has hiked 300 basis points since March to curb runaway price pressures and is expected to add another 125 basis points before the end of the year. Economists expect further hikes in 2023, making any discussion of “peak inflation” pointless for now.

“Policymakers have made it clear that it will take more than a number to sway them, but investors have never been one to wait that long,” said OANDA analyst Craig Erlam, questioning any premature resumption of risk on the markets in expectation of a decline in Fed rates. .

Crude prices actually started Thursday’s session lower, with WTI and Brent down nearly 2% in the early hours of New York ahead of weekly inventory data from the Energy Information Administration.

The EIA then surprised the market by announcing huge crude production near last week. But traders took it positively after noting there were also huge outflows from the U.S. oil reserve, as well as cuts in U.S. crude exports that accounted for more than stockpiling.

Carol N. Valencia