As part of a broader risk asset rally, the front-month futures contracts for West Texas Intermediate, or WTI, the US benchmark for sweet light crude oil, increased by about $1.0 on Wednesday. Weaker-than-expected US inflation data stoked hopes that US inflation has peaked and allayed worries about overly aggressive Fed tightening in the upcoming quarters. The closing price of WTI on Wednesday was close to $91.50, a respectable recovery from earlier intraday lows of around $88 per barrel.
On Wednesday, the US dollar, which negatively correlates with oil prices, was headed for its worst day in a month, with the DXY last down at 1.0%. According to analysts, a decrease of this size would typically result in a daily gain of $2–3 barrels for WTI. On Wednesday, prices were impacted by news that oil supplies through the Druzhba pipeline, which travels from Russia through Ukraine to Europe, have resumed.
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After failing to receive payment from Russian pipeline operator Transneft, which Transneft said had been delayed by Western economic sanctions, Ukraine had stopped flows. The payment was hastily delivered on Wednesday by EU members, permitting a resumption of supplies and allaying concerns that Russia had revealed a new front in its energy blackmail campaign against the EU.
Data on the US crude oil inventories was also a main topic. The most recent weekly data was conflicting, with headline crude oil stockpiles increasing by 5.457 million barrels as opposed to the anticipated fall of 1.0 million barrels. However, a 4.978 million barrel decline in gasoline stocks was far bigger than the predicted 1.1 million barrel decline. That allayed concerns about the US’s demand being destroyed by inflation and most likely signifies a recovery in demand as a result of recent price declines.
A Reuters survey published on Wednesday allayed fears about the near-term US demand picture. The key finding was that US oil infrastructure owners anticipate strong energy demand for the remainder of 2022. This contributed to a nearly 5.0% intraday increase in US natural gas prices back above the $8.0 mark. Meanwhile, the price of oil is still falling and has been since mid-June.
The price of copper increased by more than 1.0% on Wednesday to reach its highest level since the beginning of July in the mid-$3.60 range. This increase was fueled by a strong decrease in the value of the US dollar that followed weaker-than-expected US inflation figures. A downside surprise in Chinese consumer and producer price inflation was also mentioned by traders as being favorable to prices since it gives China’s central bank more room to maintain accommodative financial conditions this year to boost growth. The world’s top user of copper is China.
Gold prices rose to new one-month highs on Wednesday near $1,808 as a result of the weak dollar and a steep decrease in US government yields. Gold prices, which are considered as both a safe haven and an inflation hedge, were unable to maintain their earlier session highs and have now fallen to trade slightly in the red due to the broad gain across risk assets.