By Stephanie Kelly
NEW YORK (Reuters) -Oil prices rose on Thursday to their highest in nearly three months after U.S. inflation data implied interest rates in the world’s biggest economy are close to their peak.
Brent crude futures were up 25 cents at $80.36 per barrel by 12:52 p.m. EDT (1652 GMT). The session peak was $81.35 a barrel, the highest since April 26.
U.S. West Texas Intermediate crude futures rose 19 cents to $75.94. The session high was $76.90 a barrel, its strongest since April 28.
Data on Wednesday showed U.S. consumer prices rose modestly in June and registered their smallest annual increase in more than two years as inflation continued to subside.
“We’ve had very low inflation numbers today,” said Phil Flynn, an analyst at Price Futures Group, discussing the price move. Fears that the Federal Reserve was going to raise interest rates had posed a headwind to oil, he said.
Markets expect just one more interest rate rise. Higher rates can slow economic growth and reduce oil demand.
Oil prices have rallied by around 12% in two weeks, primarily in response to supply cuts from top producers Saudi Arabia and Russia, said Craig Erlam, senior market analyst at OANDA.
The futures contract structure of the global benchmark Brent indicates the market is tightening and that OPEC could be succeeding in its mission to support the market.
The premium of a front-month Brent contract to a six-month February 2024 contract rose to $2.64 a barrel on Wednesday. At the end of June, the front-month contract was at a discount to the six-month contract.
A report by the International Energy Agency (IEA) on Thursday predicted oil demand would hit a record high this year, though broader economic headwinds and interest rate hikes meant the increase would be slightly less than previously anticipated.
An OPEC report also published on Thursday maintained an upbeat world oil demand outlook despite economic weakness. It raised its growth forecast for 2023 and predicted only a slight slowdown in 2024, with China and India expected to keep driving the expansion in fuel use.
In China however momentum in the post-pandemic recovery slowed, with exports contracting last month at their fastest pace since the onset of the pandemic three years ago, the country’s Customs Bureau showed.
(Reporting by Stephanie Kelly in New York; Additional reporting by Natalie Grover in London, Jeslyn Lerh in Singapore and Laura Sanicola in Washington; Editing by Jacqueline Wong, Elaine Hardcastle, Barbara Lewis, Conor Humphries, Jan Harvey and David Gregorio)
