Oil falls on strong dollar ahead of consumer sentiment data

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The U.S. Bureau of Labor Statistics reported on Thursday that the producer price index for final demand fell 0.5% from the previous month while continuing to rise 9.8% from to a year ago. Excluding volatile food and energy, the so-called core PPI rose 0.2% from June and 7.6% from a year earlier. Both overall and base numbers were weaker than expected. The data suggests that wholesale inflation is starting to ease, which could ultimately temper the pace of consumer price growth in the months ahead.

The PPI followed July’s weaker-than-expected CPI reading after climbing 1.3%, taking the annualized inflation rate from a 41-year high of 9.1% to 8.7% , according to the BLS. Lower gasoline prices, down 7.7% in July, offset increases in food and housing costs, leading to slower headline inflation than markets had expected. Core prices, which exclude the volatile food and energy categories, rose 0.3% from June, but are still at a slower pace than June’s 0.7% rise from June. to May.

Separately, six oil and gas fields in the Gulf of Mexico were closed on Thursday after a leak at a Louisiana booster station shut down two pipelines in the region. Shell has confirmed that its Mars and Amberjack pipelines, which together can transport up to 500,000 barrels per day (bpd) of oil from the Gulf of Mexico to the coast, have been shut down. This resulted in the closure of Shell’s Mars, Ursa and Olympus fields, as well as Chevron Corp.’s Malo, Tahiti and Big Foot fields, the companies said.

The outage comes at a time when the global energy supply is extremely tight. While commercial crude inventories in the United States have been cushioned by the government’s tapping of emergency oil reserves, inventories nonetheless remain below the five-year average. Supply could tighten further, with the International Energy Agency predicting an acceleration in oil demand this year.

“Natural gas and electricity prices have hit new records, prompting a switch from gas to oil in some countries,” the Paris-based energy watchdog said in its oil market report. of August released Thursday.

The switch from gas to oil in power generation is expected to offset weakness in other sectors caused by the economic slowdown and a partial shutdown of industrial capacity across the European Union.

A similar sentiment was echoed in the monthly oil market report also released on Thursday by OPEC economists which pointed to a tendency to burn more crude in European power generation as one of the reasons why the demand remains strong this year. Despite this expectation, OPEC has revised down its demand projections from the previous month’s assessment, but still shows healthy growth of 3.1 million bpd this year and 2.7 million bpd in 2023. OPEC expects total oil demand to average around 100 million bpd in 2022. For 2023, global oil demand growth forecast remains unchanged at 2.7 million bpd. bpd.

In early trading, near month delivery West Texas Intermediate fell around $1.50 to $92.80 a barrel (bbl), and the ICE Brent contract for October delivery fell $1.45 to $98.15 a barrel. The September NYMEX RBOB traded 4.95 cents lower at $3.0220 gallons, while the NYMEX September ULSD contract was flat near $3.4850 gallons.

Liubov Georges can be reached at [email protected]

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