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Wholesale Prices in U.S. Rose More Than Forecast in September

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Producer price index
  • Wholesale Prices in U.S. Rose More Than Forecast in September

Wholesale prices in the U.S. rose by more than projected in September, helped by higher costs for energy and food and indicating inflation may be picking up.

The producer-price index increased 0.3 percent, the first gain in three months, after being little changed in August, a Labor Department report showed Friday. The median forecast of economists called for a 0.2 percent gain.

More stable commodity costs and a diminishing effect from last year’s surge in the dollar are allowing for more price pressures in the production pipeline. Federal Reserve officials are watching for consumer inflation to make sustained progress toward their 2 percent annual target as they consider raising interest rates by year-end.

Separately, the Commerce Department reported that retail sales rose 0.6 percent in September from the previous month.

Projections for producer prices ranged from an advance of 0.1 percent to 0.4 percent, according to the Bloomberg survey.

From a year earlier, producer prices increased 0.7 percent, the most since December 2014, after being little changed in the prior 12-month period. Energy costs rose 2.5 percent from the prior month, and food prices showed a 0.5 percent gain.

Core Prices

Excluding food and energy, wholesale prices climbed 0.2 percent from the previous month following a 0.1 percent rise. Those costs rose 1.2 percent from September 2015.

Taking out food and energy and also eliminating trade services, producer costs rose 0.3 percent for a second month. Some economists prefer this reading because it strips out the most volatile components of PPI. Compared with a year earlier, this core measure was up 1.5 percent, the biggest increase since November 2014.

One key takeaway from the report was the change in health care prices that are used to calculate the Commerce Department’s consumer spending inflation index, the Fed’s preferred price measure.

Those costs rose 0.1 percent in September from the prior month, before adjusting for seasonal variations, and were up 1.6 percent from a year earlier. In August, they rose 0.4 percent from the previous month.

The producer price gauge is one of three monthly inflation reports released by the Labor Department, the other two being import costs and consumer prices.

 

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

A Loud Blast Heard in Dhahran, Saudi Arabia’s Largest Crude Oil Production Site

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Loud Blast Heard in Dhahran, Saudi Arabia’s Largest Crude Oil Production Site

Two residents from the eastern city of Dhahran, Saudi Arabia, on Sunday said they heard a loud blast, but they are yet to know the cause, according to a Reuters report.

Saudi’s Eastern province is home to the kingdom’s largest crude oil production and export facilities of Saudi Aramco.

A blast in any of the facilities in that region could hurt global oil supplies and bolster oil prices above $70 per barrel in the first half of the year.

One of the residents said the explosion took place around 8:30 pm Saudi time while the other resident claimed the time was around 8:00 pm.

However, Saudi authorities are yet to confirm or respond to the story.

 

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Crude Oil

Brent Crude Oil Approaches $70 Per Barrel on Friday

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Crude oil

Nigerian Oil Approaches $70 Per Barrel Following OPEC+ Production Cuts Extension

Brent crude oil, against which Nigerian oil is priced, rose to $69 on Friday at 3:55 pm Nigerian time.

Oil price jumped after OPEC and allies, known as OPEC plus, agreed to role-over crude oil production cuts to further reduce global oil supplies and artificially sustain oil price in a move experts said could stoke inflationary pressure.

Brent crude oil rose from $63.86 per barrel on Wednesday to $69 per barrel on Friday as energy investors became more optimistic about the oil outlook.

While certain experts are worried that U.S crude oil production will eventually hurt OPEC strategy once the economy fully opens, few experts are saying production in the world’s largest economy won’t hit pre-pandemic highs.

According to Vicki Hollub, the CEO of Occidental, U.S oil production may not return to pre-pandemic levels given a shift in corporates’ value.

“I do believe that most companies have committed to value growth, rather than production growth,” she said during a CNBC Evolve conversation with Brian Sullivan. “And so I do believe that that’s going to be part of the reason that oil production in the United States does not get back to 13 million barrels a day.”

Hollub believes corporate organisations will focus on optimizing present operations and facilities, rather than seeking growth at all costs. She, however, noted that oil prices rebounded faster than expected, largely due to China, India and United States’ growing consumption.

The recovery looks more V-shaped than we had originally thought it would be,” she said. Occidental previous projection had oil production recovering to pre-pandemic levels by the middle of 2022. The CEO Now believes demand will return by the end of this year or the first few months of 2022.

I do believe we’re headed for a much healthier supply and demand environment” she said.

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Crude Oil

Oil Jumps to $67.70 as OPEC+ Extends Production Cuts

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Oil Jumps to $67.70 as OPEC+ Extends Production Cuts

Brent crude oil, against which Nigerian oil is priced, rose to $67.70 per barrel on Thursday following the decision of OPEC and allies, known as OPEC+, to extend production cuts.

OPEC and allies are presently debating whether to restore as much as 1.5 million barrels per day of crude oil in April, according to people with the knowledge of the meeting.

Experts have said OPEC+ continuous production cuts could increase global inflationary pressure with the rising price of could oil. However, Saudi Energy Minister Prince Abdulaziz bin Salman said “I don’t think it will overheat.”

Last year “we suffered alone, we as OPEC+” and now “it’s about being vigilant and being careful,” he said.

Saudi minister added that the additional 1 million barrel-a-day voluntary production cut the kingdom introduced in February was now open-ended. Meaning, OPEC+ will be withholding 7 million barrels a day or 7 percent of global demand from the market– even as fuel consumption recovers in many nations.

Experts have started predicting $75 a barrel by April.

“We expect oil prices to rise toward $70 to $75 a barrel during April,” said Ann-Louise Hittle, vice president of macro oils at consultant Wood Mackenzie Ltd. “The risk is these higher prices will dampen the tentative global recovery. But the Saudi energy minister is adamant OPEC+ must watch for concrete signs of a demand rise before he moves on production.”

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