Oil prices jump as US PPI data spurs up hopes of an ease in inflation indicators

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Oil prices jump as US PPI data spurs up hopes of an ease in inflation indicators

On Tuesday, both US WTI (West Texas Intermediate) and UK crude oil contracts’ prices rose over 1.0 per cent, as US PPI (Producer prices Index) growth rose less than anticipated last month, turbocharging investors’ hope that US inflation might have peaked.

Apart form that, as Beijing, the world’s largest oil importer, had decided to ease its pandemic-led restrictions, optimism over an increase in oil demand had heightened up significantly. According to US PPI data, US producers’ spending for raw materials rose by 0.2 per cent last month, while September data was revised lower to 0.2 per cent from an initial projection of 0.4 per cent, eventually stoking anticipations that US inflation might be allaying, suggested analysts.

On top of that, gasoline prices had accounted for a nearly 60 per cent of US PPI growth last month, spurring up hopes of a higher demand despite a gloomier outlook on manufacturing activity front. However, if truth is to be spoken, latest downswing in US PPI was largely galvanized by a fall in costs of service sector activities, as demands slowed amid a higher interest rate.

Amid such conflicting narratives, it remains to be seen on whether latest PPI data would stem a lower consumer price index (CPI) this month with costs of basic goods such as households and foods soaring at a breakneck pace, suggested analysts.

Crude oil prices rise over 1 per cent

Citing statistics, in the day’s late-afternoon US trading, UK crude was trading 1.1 per cent higher to $94.16 a barrel, while US WTI crude oil futures’ prices feathered up 1.4 per cent to $87.05.

Adding that the latest US PPI had added to a boost to both commodity market alongside money markets across the globe, a partner at Again Capital LLC in New York, John Kilduff at Again Capital said, “The inflation data was positive in a way. Stocks took off from that and it looks like we're getting dragged higher now”.