Oil Prices Edge Up Amid Cooling U.S. Inflation and Supply Surplus Concerns

Arabian Post Staff -Dubai

Oil prices experienced a modest increase on Monday, buoyed by lower-than-expected U.S. inflation data that has rekindled hopes for potential policy easing. However, the market remains cautious due to projections of a supply surplus in the coming year.

Brent crude futures rose by 36 cents, or 0.5%, reaching $73.30 per barrel. Similarly, U.S. West Texas Intermediate (WTI) crude futures climbed 39 cents, or 0.6%, to $69.85 per barrel. This uptick follows a period where both benchmarks had seen declines exceeding 2% in the previous week, influenced by signals from the U.S. Federal Reserve indicating a more measured approach to policy easing.

Analysts interpret the subdued inflation figures as a potential catalyst for the Federal Reserve to consider easing monetary policies, which could stimulate economic growth and, by extension, increase energy demand. Tony Sycamore, an analyst at IG Markets, noted that the cooling inflation data has alleviated concerns following the Federal Reserve’s recent hawkish stance on rate cuts.

Despite these positive indicators, the oil market is contending with forecasts of a supply surplus in 2025. J.P. Morgan analysts project that supply will outpace demand by approximately 1.2 million barrels per day next year, exerting downward pressure on prices. This anticipated surplus is compounded by expectations of peaking oil consumption in major markets.

In China, the world’s largest crude importer, state-owned refiner Sinopec forecasts that the nation’s oil consumption will peak by 2027, driven by declining demand for diesel and gasoline. This projection adds to concerns about future demand in a market already wary of oversupply.

The strength of the U.S. dollar is another factor influencing oil prices. A robust dollar makes oil more expensive for holders of other currencies, potentially dampening demand. The dollar’s recent ascent to a two-year high has added pressure to commodity prices, including oil.

Also published on Medium.

Notice an issue?