NEW YORK, Jan 12 (Reuters) – Oil prices gained about USD 1 a barrel on Thursday, supported by figures showing U.S consumer prices unexpectedly fell in December and by optimism over China’s demand outlook.
The US consumer price index dipped 0.1%, suggesting inflation was now on a sustained downward trend. Top oil importer China is reopening its economy after the end of strict COVID-19 curbs, boosting hopes of higher oil demand.
Brent crude settled at USD 84.03 a barrel, rising USD 1.36, or 1.7%. US West Texas Intermediate crude settled at USD 78.39 a barrel, gaining 98 cents, or 1.3%.
Also boosting oil, the US dollar tumbled to a nearly 9-month low against the euro after inflation data lifted expectations that the Federal Reserve will be less aggressive going forward with rate hikes.
“The market was looking forward to the CPI data and the strong possibility the number would spawn a slide in the dollar, with the reverse correlation super sizing the bid in crude oil,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude Oil is now feasting on the weak dollar.”
On Wednesday, both oil benchmarks jumped 3% on hopes the global economic outlook may not be as bleak as many feared.
“A softer landing for the US, and perhaps elsewhere, combined with a strong economic rebound in China following the current COVID wave could make for a much better year than feared and stimulate extra crude demand,” said Craig Erlam of brokerage OANDA before the CPI data was issued.
The market is also bracing for an additional curb on Russian oil supply due to sanctions over its invasion of Ukraine.
The US Energy Information Administration said the upcoming EU ban on seaborne imports of petroleum products from Russia on Feb. 5 could be more disruptive than the EU ban on seaborne imports of crude oil from Russia implemented in December 2022.
Limiting oil’s gains was a hefty and unexpected jump in US crude oil inventories.
“Other than the China factor and recent lift in the equities amidst some weakening in the dollar, the complex doesn’t appear to possess much bullish impetus, especially when viewed within the context of transparent US crude and product balances,” said Jim Ritterbusch of consultancy Ritterbusch and Associates.
Crude inventories rose by 19 million barrels in the week ended Jan. 6 to 439.6 million barrels. Analysts polled by Reuters had expected a 2.2-million-barrel drop.
(Additional reporting by Alex Lawler, Laura Sanicola and Emily Chow; editing by Kirsten Donovan, David Evans and David Gregorio)
This article originally appeared on reuters.com