Oil closed higher today, amid dollar weakness following US PCE and Gross Domestic Product (GDP) inflation data in the first quarter of this year. WTI for June closed up 0.92% (US$0.76), at US$83.57 a barrel, on the New York Mercantile Exchange (Nymex), and Brent for July rose 0.84% (US $0.73), at US$87.77 per barrel, on the Intercontinental Exchange.
In the morning, it was reported that American GDP increased 1.6% in the first quarter, in the annualized reading, below the Broadcast Projections median of 2.4%, and with a clear deceleration after the 3.4% gain seen in the quarter previous. The PCE rose 3.4% in the same reading, after rising 1.8% in the fourth quarter, and the core index rose 3.7%.
According to Citi, today’s focus was on the PCE core being stronger than expected, although expectations have also grown that the Federal Reserve (Fed) will cut interest rates sooner than expected to contain the slowdown in growth this year. After the release of the data, oil gains decreased, and the price fluctuated close to stability. However, as investors priced in the results and the dollar lost strength, the commodity gained strength again.
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Also today, the World Bank released its updated projection for the price of a barrel of Brent. The institution expects the value to slow to US$84 per barrel this year, and then fall to US$79 in 2025. This scenario, however, assumes that conflicts in the Middle East will not affect the commodity’s distribution chain, if conflicts spread, Brent could reach US$100 by the end of the year, in the worst case scenario predicted by the Bank.
