By Ahmad Ghaddar
(Reuters) – Oil prices rose sharply on Wednesday after U.S. economic data showed that inflation in the world’s biggest oil consumer rose moderately in March.
Brent crude gained $1.11, or 1.3%, to $86.72 a barrel by 1354 GMT while U.S. West Texas Intermediate rose $1.03, or 1.3%, to $82.56.
Prices had risen about 2% on Tuesday amid optimism that the U.S. Federal Reserve is getting closer to ending its cycle of interest rate hikes.
The U.S. Consumer Price Index (CPI) climbed 0.1% last month after advancing 0.4% in February, the Labor Department said on Wednesday.
In the 12 months to March 31 the CPI increased 5%, the smallest year-on-year gain since May 2021. The CPI rose 6% year on year in February.
“Ultimately further evidence of U.S. inflation slowing could fuel the disinflation story that Fed Chair Jerome Powell has talked about recently, sending the dollar lower,” FXTM analyst Lukman Otunuga said.
A weaker U.S. currency makes dollar-priced oil cheaper for buyers holding other currencies.
Philadelphia Federal Reserve Bank President Patrick Harker on Tuesday said that he felt the U.S. central bank may soon be done raising interest rates while Minneapolis Federal Reserve Bank President Neel Kashkari said he believed inflation, now at a rate of 5% by the Fed’s preferred measure, will get to “the mid-threes” by the end of the year.
Meanwhile, data from the American Petroleum Institute (API) showed crude inventories rose by about 380,000 barrels in the week ended April 7, sources said, against forecasts from eight analysts polled by Reuters for a decline of 600,000 barrels.
At the same time, gasoline inventories rose by about 450,000 barrels, according to the API report. Analysts had expected a drawdown of 1.6 million barrels.
The U.S. government will release its stockpile data at 10:30 a.m. (1430 GMT) on Wednesday.
The Biden administration plans to refill the U.S. Strategic Petroleum Reserve soon and hopes to refill it at lower oil prices if it’s advantageous to taxpayers, U.S. Energy Secretary Jennifer Granholm said on Wednesday.
In another negative for oil demand, the International Monetary Fund on Tuesday trimmed its 2023 global growth outlook, citing the impact of higher interest rates.
The market also awaits clarity on oil demand and supply, with monthly reports from the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency due on Thursday and Friday respectively.
The U.S. Energy Information Administration on Tuesday cut its forecast for oil production by OPEC countries by 0.5 million barrels per day for the rest of 2023 and cut its 2023 world oil demand growth forecast by 40,000 bpd.
(Reporting by Ahmad Ghaddar; Additional reporting by Muyu Xu and Arathy Somasekhar; Editing by Bernadette Baum and David Goodman)
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