DTN Oil

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude on the Intercontinental Exchange deepened losses in afternoon trading Thursday after government data showed inflation in the United States ticked higher last month for the first time in over a year, with "super-core" prices -- a measure closely watched by the Federal Reserve, having reaccelerated on the back of surging rents and transportation services.

West Texas Intermediate and Brent futures retreated from multi-month highs on Thursday, falling more than $1 per barrel (bbl) under pressure from concerns over resurgent inflation. WTI September futures on NYMEX dropped $1.58 per bbl from its highest spot settlement in nine months to $82.82 per bbl, and ICE Brent for October delivery declined $1.15 from $87.55 per bbl, the highest settlement on the spot continuous chart since January, to $86.40 per bbl.

NYMEX September RBOB futures dropped back $0.0237 to $2.9047 per gallon, and the September ULSD contract retreated $0.0537 from a more-than-six-month high to $3.1533 gallon.

Thursday's lower settlements follow the Thursday morning release of the U.S. consumer price index that showed some measures of inflation increased in July after 12 consecutive months of easing. On an annualized basis, headline inflation rose to 3.2% from June's 3%, led by price increases in the shelter, food, and transportation services.

The report triggered some jitters in the market that a disinflationary trend may be reversing that could lead to more demand destroying action from the Federal Reserve. Still, over 90% of investors anticipate no change to the federal funds rate at the Federal Open Market Committee's next meeting on Sept. 20, but odds are rising that rates, currently in a 5.25% by 5.5% target range, could go higher in the final months of the year, according to probability data from CME's FedWatch Tool.

The U.S. dollar index initially fell in a kneejerk reaction to the inflation report before regaining momentum against global peers to finish the session higher at 102.367. Equities on Wall Street finished mixed Thursday after fluctuating for most of the session. Dow Jones Industrials settled the session 52.79 points higher at 35,176.15, and the S&P 500 ended near flat at 4,468.83.

Also on Thursday, the Organization of the Petroleum Exporting Countries released its Monthly Oil Market Report forecasting the global oil market could see a 2-million-barrel-per-day (bpd) production shortfall against demand after Saudi Arabia and Russia slashed production and oil exports. Saudi oil production declined by 968,000 bpd last month to 9.021 million bpd -- the lowest output rate since 2011 outside the 2020 pandemic, as the kingdom followed through on its announcement in June that it would slash output by 1 million bpd in July. Riyadh extended the production cut into August, and on Aug. 3, said it would maintain the lower output rate through September, and could further extend the cut or even deepen the reduction into the fourth quarter. Russian oil production is estimated to have fallen to 9.93 million bpd in the third quarter, down from 11.2 million bpd reported at the start of the year.

Tighter available oil supplies from OPEC+'s largest oil producers come as global oil demand is expected to continue to climb to a new record-high 102 million bpd this year, up by 2.3 million bpd. For 2024, world oil demand is forecast to grow by a healthy 2.2 million bpd, unchanged from the previous assessment.

Liubov Georges can be reached at Liubov.Georges@dtn.com