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Traders are wondering how high oil prices will go after prices rose above $90 a barrel this week for the first time since October.
Brent crude, the international benchmark, surpassed $91 a barrel on Friday, bringing its gains for the year to 18 percent. The US West Texas Intermediate Index was even stronger, rising by 21 percent.
The upward moves in the past two weeks, after a month in a narrow range, were partly driven by fears of a widening conflict in the Middle East, including the possibility of a violent Iranian response to a suspected Israeli attack on its consulate in Damascus. .
Analysts said prices are likely to remain high even if political tensions begin to ease, because economic growth in the United States, Europe and China is likely to boost demand, and OPEC+ is restricting supplies.
“It's supply and demand with geopolitics at the forefront,” said Paul Horsnell, global head of commodities at Standard Chartered.
The latest report from the International Energy Agency expects non-OPEC+ supply growth to reach 1.6 million barrels per day this year, down from 2.4 million in 2023.
“Much of the market thought last year's growth would continue unabated this year. That did not happen,” said Horsnell, who expects prices to remain above $90 a barrel in the coming months. The coming months.
Ihsan Khoman, head of commodities at MUFG, said that with OPEC+ still holding the supply cards, prices are likely to remain high as long as major advanced economies do not sink into a deep recession.
However, he noted that OPEC+ countries would likely ease production curbs if oil prices rose above $100 per barrel to avoid “eating into their exports.” Stephanie Stacy
What will the European Central Bank say about lowering interest rates?
Eurozone inflation has fallen dramatically close to the European Central Bank's target, and the bloc's economy appears stuck in recession, yet policymakers are widely expected to keep interest rates unchanged when they meet on Thursday.
The main reason for rate setters' caution is the continued stability of services inflation, which has remained at an uncomfortably high annual rate of 4 per cent for five months in a row, even as headline inflation slowed to 2.4 per cent in March.
The European Central Bank fears that wages will continue to rise rapidly as workers seek to regain the purchasing power they lost in the worst cost of living crisis in a generation, which would continue to push up prices in the labor-intensive services sector.
There is broad consensus among members of the ECB's Governing Council that they should wait until the June meeting to decide whether to start cutting interest rates, when they will have more data to assess whether wage growth is slowing enough to ease services inflation.
There are still doubts about how strong a signal the European Central Bank will send about a possible interest rate cut in June. Mariano Sena, an economist at Barclays, believes he can do this by changing the wording of his policy statement, so that it no longer says interest rates must be “maintained for a sufficiently long period” to bring inflation to its 2 per cent target.
However, Paul Hollingsworth, economist at BNP Paribas, believes it will be up to ECB President Christine Lagarde's post-meeting press conference to provide guidance without tying the central bank's hands.
He added: “It could suggest that the ECB assesses in June whether the conditions have been met to start reducing the degree of policy restrictions.” Martin Arnold
Did US core inflation slow in March?
Investors will be looking to see if the latest US inflation data will give the Fed more confidence to move forward with rate cuts this summer.
The headline inflation number released by the Bureau of Labor Statistics on Wednesday is expected to come in at 3.5 percent for March, up from 3.2 percent the previous month, according to a Bloomberg poll of economists conducted last month. This increase is expected to be due to rising energy prices.
However, core inflation, the Fed's preferred measure because it excludes volatile food and energy sectors, is expected to decline modestly to 3.7 percent, down from 3.8 percent in February.
Indicators that inflation is approaching the Fed's 2 percent target have been difficult to come by, in part because housing inflation has remained high. Analysts at TD Securities say inflation in the housing market last month was likely to be mixed.
Progress in core inflation could influence the Fed as it considers when to start cutting interest rates. Officials indicated at the central bank meeting last March that they expected to make cuts of 0.75 percentage points this year, but economic data showing a resilient and growing economy raised doubts in the minds of investors. Markets are currently betting on just under three cuts by December. Kate Duguid
