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U.K. Inflation Resumes Ascent as Air Fares, Energy Prices Rise

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  • U.K. Inflation Resumes Ascent as Air Fares, Energy Prices Rise

U.K. inflation resumed its upward march last month, boosted by the price of air fares, clothing and energy.

Consumer prices rose 2.7 percent from a year earlier, the fastest pace since September 2013, the Office for National Statistics said Tuesday. The acceleration, from 2.3 percent in March, was more than economists were expecting. Prices rose 0.5 percent on the month.

The figures spell further misery for consumers as wages fail to keep pace with prices. Bank of England Governor Mark Carney last week warned of “challenging times,” with officials now predicting inflation will reach almost 3 percent this year.

Faster inflation has also led to talk of tightening policy among BOE rate-setters. With price growth climbing further above their 2 percent target, Kristin Forbes maintained her push for an interest rate hike this month and some felt it would take only a little improvement to the outlook to consider joining her. For now, they judge domestic cost pressure to be subdued.

The pickup last month was driven by transport costs, reflecting the fact that the Easter vacation fell in April this year rather than in March. Airfares rose almost 19 percent on the month, whereas they plunged more than 14 percent a year earlier.

Upward pressure also came from a 2.5 percent jump in electricity prices as SSE Plc, EON SE and Iberdrola SA’s ScottishPower business became the latest of the Big Six U.K. energy firms to hike tariffs. Other factors included clothing and footwear, which rose 1.1 percent, and vehicle excise duty. These were partly offset by the cost of motor fuel, which fell 1.5 percent versus a 3.4 percent jump a year earlier.

Sterling Effect

Inflation has climbed from just 0.3 percent a year ago, thanks to the sharp fall in the pound since the June Brexit vote pushing up import prices. Core inflation, which excludes food and energy, was 2.4 percent last month.

The pipeline pressures facing business and consumers were underscored by separate figures from ONS showing the cost of fuel and raw material prices jumped an annual 16.6 percent in April. The prices of goods charged by factories rose 3.6 percent.

Sterling’s relative stability recently and weaker oil prices provided some relief last month, with input prices rising just 0.1 percent from March. Output prices gained 0.4 percent.

The ONS said house-price growth slowed to 4.1 percent, the least since 2013, in March from 5.6 percent in February. Prices in London rose just 1.5 percent.

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 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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