Oil prices slightly higher as optimism around US inflation data outweighs

HOUSTON: Oil prices settled marginally higher on Friday after data showed an overall slowdown in US inflation, helping offset supply concerns as OPEC+ is leaning towards a resumption in production increases.

Brent crude futures closed 23 cents, or 0.3percent, higher at USD67.75 a barrel, while US West Texas Intermediate crude settled 5 cents, or 0.08percent higher at USD62.89. Both benchmarks posted weekly declines after incurring near 3percent losses on Thursday. Brent settled down about 0.5percent, while WTI lost 1percent in the week. US consumer prices increased less than expected in January amid cheaper gasoline prices and a moderation in rental inflation.

“Looks like inflation is stabilizing. So, I think that’s going to be a boon for interest rates to probably continue to move a little bit lower. And I think as rates start to move lower… that’s a positive to the economy,” said Dennis Kissler, senior vice president of trading at BOK Financial.

“The negative is going to be that OPEC could possibly increase production a little further,” he added. Prices fell earlier in the session as investors reacted to a Reuters report that OPEC is leaning towards a resumption in oil output increases from April, ahead of upcoming peak summer fuel demand, and amid firmer crude prices owing to tensions over US-Iran relations.

On the US supply side, Baker Hughes said oil rigs fell by three to 409 this week. Oil prices had strengthened earlier in the week on concerns that the US could attack Middle Eastern oil producer Iran over its nuclear programme.

But comments on Thursday from US President Donald Trump that Washington could make a deal with Iran over the next month drove down prices on Thursday.

The Pentagon, however, is sending an aircraft carrier from the Caribbean to the Middle East, US officials said on Friday, a move that would put two carriers in the region as tensions soar between the United States and Iran.

Russia, meanwhile, said on Friday that the next round of peace talks on Ukraine will take place next week. Negotiations with Iran and Russia will be the near-term market movers, Kissler said, adding that near-term global crude supplies remain ample and crude futures likely have a USD5 to USD7 per barrel geopolitical premium baked in.

The US also eased sanctions on Venezuela’s energy sector on Friday, issuing two general licenses that allow global energy companies to operate oil and gas projects in the OPEC member and for other companies to negotiate contracts to bring in fresh investments.

Oil sales from Venezuela controlled by the US have totalled over USD1 billion so far and in the next few months will bring in another USD5 billion, US Secretary of Energy Chris Wright told NBC News on Thursday.