Consumer Price Index, has flattened and slightly decreased recently, in part because energy-sector inflation has slowed down as oil prices have dropped and
Inflation expectations peaked in March at 3.6% (Figure 3), decreasing in recent months in part due to: This spread indicates expectations for what the inflation rate will be in five years. One measure of inflation expectations is the percentage difference between yields for five-year Treasury Inflation-Protected Securities (TIPS) and U.S. However, from July to September 2022, the price of Brent crude oil resumed a positive relationship with equity prices, with both declining as concerns about global economic conditions also reduced expectations of petroleum demand growth, accompanied by pressure from the strong US dollar (discussed above).īrent price and inflation expectations: Inflation expectations also often move together with crude oil prices. As the Federal Reserve has increased interest rates to curb inflation, borrowing costs for companies have grown and expectations for economic growth have declined, putting further downward pressure on the S&P 500. These price increases contributed to higher inflation and input costs for companies, leading to a decline in the S&P 500. Oil prices and equities began moving in opposite directions in early 2022, when the price of crude oil continued increasing as Russia’s full-scale invasion of Ukraine intensified global petroleum supply concerns. For example, from the second half of 2020 (2H20) through 2021, the Brent crude oil price and the value of the S&P 500 both increased as economic growth was reflected in the rising profitability of companies as well as in rising demand for oil (Figure 2). This reduction in forecast GDP led us to lower our forecast for global petroleum demand in 2023 by 0.5 million b/d compared with the September Short-Term Energy Outlook.īrent price and S&P 500: In the past few years, the price of Brent crude oil has often, but not always, moved in the same direction as the value of the S&P 500, an equity index of widely traded U.S. We use Oxford Economics’ forecast as an input into our global oil demand model. With macroeconomic uncertainty rising, Oxford Economics lowered its forecast for global GDP growth to 2.2% for 2023, down from 2.7% last month.
A strengthening dollar also creates additional macroeconomic uncertainty by raising debt servicing costs for countries holding U.S. dollar makes it more expensive to convert local currency into the U.S. For countries using other currencies, including many of the globe’s emerging markets, the strengthening U.S. dollar increasing to its highest value since 2002. currency as a safe-haven asset during uncertain economic conditions. financial assets as a result of the Federal Reserve raising interest rates to curb inflation and because investors seek out U.S. Investors have increasingly purchased U.S.
These decreases in crude oil prices have not affected all countries evenly, however, because Brent crude oil is priced in U.S. September marked the third consecutive month in which the Brent crude oil futures price decreased, bringing the total decrease to $27/b in those three months. The front-month futures price for Brent crude oil averaged $7/b lower in September than in August. In addition, the 180 million barrel Strategic Petroleum Reserve release conducted in recent months may also have relieved supply concerns. Prior to the OPEC+ announcement and the speculation of cuts in the days immediately preceding the announcement, crude oil prices were generally decreasing due to increasing concerns around weakening global economic conditions. From September 30 to October 6, the front-month futures price for Brent crude oil increased by $6.46/b and the front-month futures price for WTI crude oil increased by $8.96/b. These price increases are mostly attributable to expectations around crude oil production cuts by OPEC+ producers, which were announced at 2 million b/d on October 5. The front-month futures price for West Texas Intermediate (WTI) crude oil for delivery at Cushing, Oklahoma, increased by $1.84/b during the same period, settling at $88.45/b on October 6 (Figure 1). Prices: The front-month futures price for Brent crude oil settled at $94.42 per barrel (b) on October 6, an increase of $2.06/b from the September 1 price of $92.36/b.
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