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Oil after inflation data – hurrah for the bulls!

Oil is enjoying another green day after the US Consumer Price Index release. News are suggesting Fed could slow down the hikes even more.

The Consumer Price Index, report for December came in at the lows that economists had predicted. This makes it more likely that the Federal Reserve will keep to smaller rate hikes this year, which would help businesses in the country a lot after the big rate hikes last year that shook the markets. Bulls were dominant and took risks in most areas, including oil.

The CPI rose 6.5% according to Thursday’s report, which is much better than June’s “not seen for 40 years” 9.1% inflation. The Fed’s target was 2%, therefore Fed started the hiking spree.

In June, July, September, and November, the Fed raised rates by 75 basis points each time. In December, they raised rates by only 50 basis points. Analysts suggest the central bank to raise rates by 25 basis points when it makes its next decision on February 1st.

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As a result, crude futures went up for the fifth time in seven days. WTI, or West Texas Intermediate, for February delivery on the New York Mercantile Exchange was up $1.16, or 1.5%, to $78.57. Oil is closing in on the psychological $80 again. The session high was $79.16. So far oil rose of 6.7% this week.

Brent crude for delivery in March on the London market was up $1.50, or 1.8%, to $84.17. Earlier in the day, it reached a high of $84.61. After falling 8.5% last week, this put the global crude benchmark on track to rise 7% this week.

More to read: GBP/USD expects US inflation data above key supports 

Most street analysts think that this could be a much better year for oil than they thought it would be because of China’s economy. So, the demand for oil could go up, and WTI prices would stay high unless production goes up.

As sanctions against Russia are about to start because it invaded Ukraine, oil traders are also getting ready for a further cut in its oil supply. On February 5th, the EU will no longer be able to buy oil from Russia.

WTI could re-test $80

Recent days have been showing a bullish sentiment, with positive expectations. If Bulls keep up the pressure, WTI futures could re-test or even break the $80 resistance mark. Bears could be planning a correction bouncing off from $80 to the 200 day MA support $76.

WTI futures

WTI futures 1h chart, source: tradingview.com, author’s analysis

Tomáš is a financial reporter with US markets as his main field. He actively started in finance only recently, however has been surrounded by many analyst and reporting professiona...

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