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Consumer Prices in U.S. Increase for Third Consecutive Month

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Consumer Prices
  • Consumer Prices in U.S. Increase for Third Consecutive Month

The cost of living in the U.S. rose for a third consecutive month, driven by fuel and housing, indicating inflation is moving closer to the Federal Reserve’s goal.

The consumer-price index climbed 0.4 percent in October from the previous month after a 0.3 percent gain in September, Labor Department figures showed Thursday in Washington. That matched the median forecast in a survey of economists. Excluding volatile food and fuel, the so-called core measure rose 0.1 percent, just below the estimate of 0.2 percent.

Firming inflation and a healthy job market have laid the groundwork for Fed officials to raise interest rates when they meet next month. With energy costs grinding higher, price pressures will have room to gain traction more broadly in the economy, while companies may begin to gain greater pricing power amid steady consumer demand.

“We’re seeing a gradual uptrend in inflation,” Mike Englund, chief economist at Action Economics LLC in Boulder, Colorado, said before the report. “It’s one more factor that locks in a Fed hike in December.”

The Fed’s preferred gauge of inflation, which is the Commerce Department’s personal consumption expenditures measure, hasn’t matched the central bank’s 2 percent goal since April 2012.

Fed Chair Janet Yellen said Thursday that a rate hike “could well become appropriate relatively soon if incoming data provide some further evidence of continued progress.” Policy makers are due to hold their final meeting for the year on Dec. 13-14, and the odds of an interest-rate increase were close to 100 percent on Thursday, according to trading in fed funds futures.

Inflation Estimates

Economists forecast for the consumer price index ranged from a decline of 0.1 percent to a gain of 0.5 percent.

The consumer price gauge increased 1.6 percent in the 12 months ended in October, after a 1.5 percent year-over-year advance the prior month.

The rise in the core CPI measure followed a 0.1 percent gain in the previous month. It increased 2.1 percent from October 2015, after rising 2.2 percent in the prior 12-month period.

The median projections in the Bloomberg survey called for the core gauge to rise 0.2 percent from the previous month, and to climb 2.2 percent from the prior year.

Energy costs increased 3.5 percent from a month earlier, with gasoline up 7 percent and accounting for more than half of the increase in the overall index, the report showed. Food prices were little changed.

“Oil prices are finding an equilibrium,” Englund said. “We’re losing the drag on the headline inflation number. Any remnants of concern about deflation are evaporating.”

Expenses for shelter climbed 0.4 percent for a second month. Owners-equivalent rent, one of the categories designed to track rental prices, was up 0.3 percent.

Cars, Clothing

Americans paid 0.2 percent more for new automobiles. Clothing prices rose 0.3 percent, while airfares decreased 2.2 percent.

Expenses for medical care were little changed. These readings often vary from results for this category within the Fed’s preferred measure of inflation. Economists attribute the discrepancy to different methodologies.

The CPI is the broadest of three price gauges from the Labor Department because it includes all goods and services. About 60 percent of the index covers prices consumers pay for services from medical visits to airline fares, movie tickets and rents.

The cost-of-living increase offset most of the gain in paychecks in October, a separate report from the Labor Department showed Thursday. Hourly earnings adjusted for inflation rose 0.1 percent from the prior month. They were up 1.2 percent over the past 12 months.

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

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

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Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Oil retreated from an earlier rally with investment banks and traders predicting the market can go significantly higher in the months to come.

Futures in New York pared much of an earlier increase to $63 a barrel as the dollar climbed and equities slipped. Bank of America said prices could reach $70 at some point this year, while Socar Trading SA sees global benchmark Brent hitting $80 a barrel before the end of the year as the glut of inventories built up during the Covid-19 pandemic is drained by the summer.

The loss of oil output after the big freeze in the U.S. should help the market firm as much of the world emerges from lockdowns, according to Trafigura Group. Inventory data due later Tuesday from the American Petroleum Institute and more from the Energy Department on Wednesday will shed more light on how the Texas freeze disrupted U.S. oil supply last week.

Oil has surged this year after Saudi Arabia pledged to unilaterally cut 1 million barrels a day in February and March, with Goldman Sachs Group Inc. predicting the rally will accelerate as demand outpaces global supply. Russia and Riyadh, however, will next week once again head into an OPEC+ meeting with differing opinions about adding more crude to the market.

“The freeze in the U.S. has proved supportive as production was cut,” said Hans van Cleef, senior energy economist at ABN Amro. “We still expect that Russia will push for a significant rise in production,” which could soon weigh on prices, he said.

PRICES

  • West Texas Intermediate for April fell 27 cents to $61.43 a barrel at 9:20 a.m. New York time
  • Brent for April settlement fell 8 cents to $65.16

Brent’s prompt timespread firmed in a bullish backwardation structure to the widest in more than a year. The gap rose above $1 a barrel on Tuesday before easing to 87 cents. That compares with 25 cents at the start of the month.

JPMorgan Chase & Co. and oil trader Vitol Group shot down talk of a new oil supercycle, though they said a lack of supply response will keep prices for crude prices firm in the short term.

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Crude Oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

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Crude oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Oil prices rose on Monday as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation, just as demand recovers from the depths of the COVID-19 pandemic.

Brent crude was up $1.38, or 2.2%, at $64.29 per barrel. West Texas Intermediate gained $1.38, or 2.33%, to trade at $60.62 per barrel.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.

Shale oil producers in the region could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output affected, sources said, as frozen pipes and power supply interruptions slow their recovery.

“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.

“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.

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Crude Oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

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oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Oil prices rose to $65.47 per barrel on Thursday as crude oil production dropped in the US due to frigid Texas weather.

The unusual weather has left millions in the dark and forced oil producers to shut down production. According to reports, at least the winter blast has claimed 24 lives.

Brent crude oil gained $2 to $65.47 on Thursday morning before pulling back to $64.62 per barrel around 11:00 am Nigerian time.

U.S. West Texas Intermediate (WTI) crude rose 2.3 percent to settle at $61.74 per barrel.

“This has just sent us to the next level,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude oil WTI will probably max out somewhere pretty close to $65.65, refinery utilization rate will probably slide to somewhere around 76%,” Yawger said.

However, the report that Saudi Arabia plans to increase production in the coming months weighed on crude oil as it can be seen in the chart below.

Prince Abdulaziz bin Salman, Saudi Arabian Energy Minister, warned that it was too early to declare victory against the COVID-19 virus and that oil producers must remain “extremely cautious”.

“We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” he told an energy industry event.

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