Global oil prices extended their bullish run on Monday during the Asian trading session following a decline in the United States Dollar attractiveness and the persistent supply concerns for the commodity.
Brent crude, against which Nigerian oil is priced, rose to $101.86 a barrel after plunging to $96.46 on Thursday when the U.S. Bureau of Statistics reported that the inflation rate accelerated at 9.1% in the month of May, the fastest pace of increase in over 40 years.
U.S. West Texas Intermediate crude oil also appreciated to $94.87 per barrel on Monday.
Last week, Dollar and other global assets posted their biggest drop on fear global economic recession is around the corner given a series of happenings like the reported rising COVID-19 cases and testing in the world’s biggest importer of crude oil.
This, experts predicted could derail whatever measures central banks put in place to curb the further escalation of consumer prices and erode retail sales. However, data released by the U.S. Commerce Department showed retail sales rose strongly in the month of June despite the high inflation number, rising by 1% from a 0.1% decline reported in May.
A critical look into the report showed even though retail sales increased, the quantity purchased did not increase. Meaning that the increase was only in response to higher prices and not based on needs.
“Padded by high savings and rising wages, American households are spending nearly as much money as they did earlier, but largely to keep up with higher prices, not to actually buy more stuff,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. “That said, today’s report may cool talk of a near-term recession.”
Still, supply remained a concern as long as Russia stay off the European market.
According to Jeffrey Halley, Senior Market Analyst, Asia Pacific, OANDA, “Supply risks remain evident in international markets, and futures curves remain in backwardation. Despite the ructions in the speculative futures markets, the real-world dynamic remains as supportive of oil prices as ever. If Russian doesn’t switch gas exports back on to Europe at the end of the week, Brent crude could once again, find itself back near $110.00 a barrel.”
