The US consumer price index accelerated in May at its fastest pace since September 2008 as the economy recovered from a recession triggered by the COVID-19 pandemic, the Labour Department reported on Thursday (June 10). They were up 5% from a year earlier. That was higher than the Dow Jones estimate of 4.7%. Year on year, the core CPI rose 3.8 percent. More than market expectations of 3.5%. The growth rate is the highest since 1992. However, from the perspective of the CPI index, the compound growth rate in May 2021 compared to May 2019 was only 2.5%.
The main reasons for this surge in inflation are base effects and supply shortages due to the pandemic. While US inflation figures continue to rise, Fed officials believe the current rise is due to transitory factors. These factors diminish over time.
Analysis that the market on the United States inflation expectations have peaked. Investors are giving up betting against the Fed. No more worries about the Fed misjudging inflation risks and causing a sharp policy U-turn.
The Organization for Economic Cooperation and Development (OECD) posted the data on its website on June 10. In the first quarter of this year, the gross domestic product of G20 members as a whole recovered to pre-Covid-19 levels. But there are still big gaps in the pace of GDP recovery across economies.
GDP in the G20 grew by 3.4% in the first quarter of this year compared with the same period last year, according to the OECD. That compared with a 0.7 percent contraction in the fourth quarter of last year. China recorded the strongest year-on-year growth of 18.3 percent in the first quarter.
Global consumption of crude oil and liquid fuels was 96.2 million b/d in May. That’s an increase of 11.9 million BPD from May 2020. But it was 3.7 million BPD lower than in May 2019.
Global oil and liquid fuel consumption is expected to average 97.7 million b/d for the full year of 2021. The U.S. Energy Information Administration (EIA) forecast Tuesday that U.S. fuel consumption will grow by 1.49 million barrels per day this year. That’s up from previous forecasts of 1.39 million BPD.
With travel restrictions lifted in Europe, vaccination rates are rising and economies are reopening. The market was boosted by a strong outlook for fuel demand growth.
There are signs of stabilization. Oil consumption in the UK and the rest of Europe is following the improvement in US travel as travel restrictions are eased. Traffic congestion in 15 European cities has reached its highest level since the pandemic began.
As temperatures soar in the Middle East, local authorities are using more oil and gas to generate electricity to cool homes. Or push fuel prices even higher.
Saudi Arabia, the United Arab Emirates and Kuwait all experienced warmer than normal weather. Both burn crude oil and fuel oil to run their power plants. Electricity consumption in OPEC-member Kuwait surpassed its previous peak this week, and the early arrival of hot weather increased air conditioning use.
The global economic recovery, and hence oil demand, is expected to gain momentum in the second half, led by the US and China, OPEC said yesterday.
Opec expects the world economy to grow 5.5 percent in 2021. The impact of the epidemic will be largely contained by the beginning of the second half of the year. Oil demand is forecast to rise 6.6%, or 5.95 million barrels a day, this year, unchanged for the second month in a row.
As Opec and its Allies cut oil supplies. Oil prices are up about 39% this year. Before the report, oil was trading above $72 a barrel.
OPEC has now restored nearly 40 percent of production halted a year ago because of the pandemic and will meet on July 1 to consider restoring the rest.
Data released on June 9 showed U.S. commercial crude stocks excluding strategic reserves fell by 5.241 million barrels, or 1.1 percent, to 474 million barrels in the week ended June 2, beating expectations of a 3.5 million barrel drop. As seen in the EIA report, U.S. crude oil inventories are showing positive signs, Posting 11 straight weekly declines, the most since 2017, and overall crude oil inventories are now below the 5-year average.
Markets are now focused on the resumption of talks on the Iranian nuclear deal. Officials at the National Iranian Oil Company said Iran would resume full oil production within three months of sanctions being lifted, according to the oil ministry’s official Shana website. And restore most of its oil production within a month of sanctions being lifted.
Despite the ongoing uncertainty over the Iran nuclear deal, the appetite for profit-taking in crude oil has increased in key market Windows.
Oil investors believe that sanctions on Iranian exports will be lifted as negotiations on a nuclear deal between Iran and the West make progress. The oil supply will increase this year.
On Tuesday, U.S. Secretary of State Blinken predicted that even if Iran resumes compliance with the Iran nuclear deal. Hundreds of U.S. sanctions against Iran will remain in place. To some extent, the resumption of the Iranian oil supply is only affecting the pace of oil price rise.
On Thursday, the U.S. Treasury Department lifted sanctions on more than a dozen former Iranian energy executives. The executives are from the National Iranian Oil Co, a state-owned oil and gas company. And so on many enterprises.
The previous sanctions were for involvement in the shipping and trading of petrochemical products last October. The signal, U.S. officials said, is that the Biden administration is committed to easing broad sanctions pressure on Iran if Tehran changes its behavior.
U.S. WTI crude futures plunged more than $1 in the short term on the news. It fell from above $70.20 to below $69 in about 10 minutes. Quickly gave up the day’s gains of nearly 0.4% to turn negative. It fell as low as $68.70. New intraday lows since Tuesday, June 8. It was down more than 1.8% for the day.
Data from the U.S. Energy Information Administration (EIA) on Wednesday showed a sharp rise in refined oil product inventories. EIA gasoline stocks actually reported a 7.046 million barrel increase. Well above expectations for a rise of 1.2 million barrels. The increase was the largest since the week ended April 3, 2020. EIA refined oil inventories actually reported a 4.412 million barrel increase. Expectations were for an increase of 1.8 million barrels. The increase was the largest since the week ended January 8, 2021.