As of 9:00 AM this morning (April 13, Vietnam time), Brent crude prices stood at $87.17/barrel; West Texas Intermediate (WTI) light sweet crude reached $83.13/barrel. At the close of yesterday's trading session, crude prices gained sharply by 2%, touching their highest level in over a month as market expectations intensified that the US Federal Reserve (FED) will soon pause its rate hike campaign.
Specifically, the US Consumer Price Index (CPI) in March 2023 rose by just 0.1% month-on-month and 5% year-on-year. This increase was lower than consensus estimates from market analysts. Notably, the March pace cooled significantly from the 6% rate recorded in February.
The US headline CPI pace has decelerated for nine consecutive months since peaking at 9.1% in June 2022. This demonstrates clear evidence of cooling inflation, with the disinflationary pace gaining momentum as it dropped by a full percentage point month-on-month, compared to typical monthly reductions of 0.5 to 0.7 percentage points previously.
Excluding volatile food and energy costs, US core inflation in March 2023 rose 0.4% month-on-month and 5.6% year-on-year, both matching consensus projections. This outcome bolstered market sentiment, fueling optimism that the Fed will soon conclude rate hikes, softening the US Dollar and enhancing the appeal of dollar-denominated raw commodities such as crude oil to global investors.
However, crude oil's upward momentum was partially tempered following the release of the minutes from the FED's latest monetary policy meeting. The minutes indicated that Fed policymakers expressed concern that recent banking sector turmoil could trigger a mild economic recession later this year. Concurrently, records revealed that officials ultimately agreed to raise rates because economic indicators at that time showed little definitive evidence of substantial easing in inflationary pressures.
Investors also remain wary that instabilities in the US banking sector could reignite as major banks commence releasing Q1 2023 earnings reports in the coming days. Markets are currently centered on evaluating prospective financial sector vulnerabilities. Any broader economic contraction would severely impair crude oil consumption prospects.
In addition, crude oil was influenced by US Department of Energy data indicating domestic commercial crude inventories climbed by 597,000 barrels last week, defying analyst forecasts of a 600,000-barrel decline. Concurrently, reductions in gasoline and distillate stockpiles were narrower than anticipated.
