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By David Gaffen
NEW YORK (Reuters) – Oil prices fell on Thursday as the dollar rose as US President Joe Biden said his administration was looking for ways to cut energy costs amid a wider rise in inflation.
Brent and futures fell sharply at the end of the session as traders sold risky assets, including stocks and commodities, fueled by expectations that central banks will take steps to curb price rises.
Wednesday’s consumer inflation data showed that US prices were rising at a year-on-year rate of 6.2%, the fastest rate in three decades, and may prompt the White House and the US Federal Reserve to take action to address this. This pushed the dollar, as oil is often traded in reverse.
futures fell $ 2.14 or 2.5% to $ 82.64 a barrel. That contract reached a high of $ 85.50 before returning to the session. U.S. crude fell to $ 2.81, or 3.3%, to $ 81.34 after reaching a high of $ 84.97 a barrel, out of the seven-year highs touched in recent weeks.
“There is certainly more pressure from the administration today after reading the inflation,” said Phil Flynn, a senior analyst at Price Futures Group. “There is growing concern that the Fed needs to return to playing more aggressively in the rate hike, so it has given the dollar a boost.”
Inflation is heating up as the economic drag of the summer wave of COVID-19 infections disappears and supply bottles continue to flow. The Federal Reserve will try to cope with the steady rise in prices, which has lasted longer than initially anticipated.
This sparked a rise in the dollar, which weakens the price of oil as it raises the cost to other nations because oil is largely traded in dollars.
Biden said he asked the National Economic Council to work to reduce energy costs and to reverse the manipulation of the market in the energy sector by the Federal Trade Commission in a greater effort to reverse inflation.
“Those comments led to market overruns,” said Bob Yawger, future energy director at Mizuho in New York.
Separately, U.S. crude stocks rose one million barrels in the past week, missing estimates of 2.1 million crude stocks.
Several markets said on Thursday that prices could continue to rise in the coming months, but also indicated that a continuous rally could boost production in the shale industry that would offset demand.
The market has risen in recent days with the Organization of the Petroleum Exporting Countries, led by Saudi Arabia, along with other exporting allies, in the hope that production will continue to grow.
High prices could push the U.S. shale oil industry to bring a million bpd to the global market, said Marco Dunand, CEO of Mercuria Energy Trading, speaking at the Reuters Commodity Trading Summit.
OPEC +, as the broader export group is called, rejected calls by the White House to boost production. US production was last at 11.5 million barrels per day, still down from nearly 13 million bpd at the end of 2019.
The White House has put its foot down on the possibility of releasing oil from the U.S. Strategic Oil Reserve, amid concerns that gasoline prices have risen recently. Generally, the US uses SPR in emergencies, such as hurricanes.
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