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Oil prices plunge into close, roiled by inflation fears

CommoditiesNov 10, 2021 03:33PM ET
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© Reuters. FILE PHOTO: A pump jack operates in front of a drilling rig at sunset in an oil field in Midland, Texas U.S. August 22, 2018. REUTERS/Nick Oxford

By David Gaffen

NEW YORK (Reuters) - Oil prices slumped on Thursday, hit by a surge in the dollar after U.S. President Joe Biden said his administration was looking for ways to reduce energy costs amid a broader surge in inflation.

Brent and U.S. crude futures dropped sharply at the end of the session as traders sold out of riskier assets, including stocks and commodities, driven by expectations that central bankers will take steps to curb rising prices.

Consumer inflation data on Wednesday showed U.S. prices were rising at a 6.2% year-over-year rate, their fastest rate in three decades, and may spur both the White House and U.S. Federal Reserve to take action to head that off. That boosted the dollar, which often trades inversely to oil.

Brent crude futures settled down $2.14, or 2.5%, to $82.64 a barrel. That contract hit a high of $85.50 on the session before retreating. U.S. crude settled down $2.81, or 3.3%, to $81.34 after reaching a high of $84.97 a barrel, just off seven-year highs touched in the last few weeks.

"There's, no doubt, more pressure on the administration after the inflation reading numbers today," said Phil Flynn, senior analyst at Price Futures Group. "There’s a growing concern the Fed may have to go back to acting more aggressively on a rate increase, so that’s given the dollar a rally."

Inflation is heating up as the economic drag from the summer wave of COVID-19 infections fades and supply bottlenecks persist. The Federal Reserve is expected to try to stave the ongoing increase in prices, which has lasted longer than originally anticipated.

That sparked a rally in the dollar, which undermines the price of oil as it raises the cost for other nations because oil is largely transacted in dollars.

Biden said he asked the National Economic Council to work to reduce energy costs and the Federal Trade Commission to push back on market manipulation in the energy sector in a larger effort to reverse inflation.

"Those comments caused the market to tank," said Bob Yawger, director of energy futures for Mizuho in New York.

Separately, U.S. crude inventories rose by 1 million barrels in the most recent week, short of estimates for a 2.1 million build in crude stocks.

Several traders said on Thursday that prices could continue to rise in coming months, but noted as well that an ongoing rally could spur more shale industry production that would offset demand.

The market has rallied in recent days on expectations that the Organization of the Petroleum Exporting Countries, led by Saudi Arabia, along with other exporting allies, would maintain a steady increase in output.

High prices could encourage the U.S. shale oil industry to unleash 1 million bpd into the global market, said Marco Dunand, chief executive at Mercuria Energy Trading, speaking at the Reuters Commodity Trading Summit.

OPEC+, as the wider exporting group is called, rebuffed calls by the White House to boost production. U.S. output was most recently at 11.5 million barrels per day, still short of the near-13 million bpd reached in late 2019.

The White House has tiptoed around the possibility of releasing oil from the U.S. Strategic Petroleum Reserve amid concern over recent soaring gasoline prices. Generally, the U.S. taps the SPR in the case of emergencies, like hurricanes.

Oil prices plunge into close, roiled by inflation fears
 

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Comments (19)
Andrew Ulferts
Andrew Ulferts Nov 10, 2021 9:23PM ET
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It’s fun to see the world waking up to fake news and deep state political games. United at last.
Scott Bailey
Scott Bailey Nov 10, 2021 5:59PM ET
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Its still over 80! The sky is falling huh Reuters?
simone scelsa
simone scelsa Nov 10, 2021 4:24PM ET
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Persistent inflation is good for oil stocks and gold miners.
Jose Maderno
Jose Maderno Nov 10, 2021 3:33PM ET
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"Several traders said on Thursday that prices could continue to rise in coming months, but noted as well that an ongoing rally could spur more shale industry production that would offset demand."  -  Well at least Reuters keeps the propaganda together time wise.
Jose Maderno
Jose Maderno Nov 10, 2021 3:30PM ET
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The accurate Reuters.... "Oil prices slumped on Thursday, hit by a surge in the dollar after U.S. President Joe Biden said his administration was looking for ways to reduce energy costs amid a broader surge in inflation."   Tell Brandon that it is Wednesday.
Robby Pandher
Robby Pandher Nov 10, 2021 3:20PM ET
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What a manipulated and rigged casino market this is. Tech stocks and real estate and Bitcoin are way more overvalued than oil and oil falls the most on the interest rate rising threat even with no investment going into oil and gas over last 6 years.
Val Lange
Val Lange Nov 10, 2021 3:17PM ET
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Oil price currently 20-30% behind the inflation rate.
Val Lange
Val Lange Nov 10, 2021 2:40PM ET
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Fed rate increase or high oil price
Bill Green
ValueInvestor555 Nov 10, 2021 1:43PM ET
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Opec will probably cut production by whatever we pump out of our SPR.  The SPR should be reserved only for shortages, not price manipulation.
Vlad Lozovskiy
Vlad Lozovskiy Nov 10, 2021 12:06PM ET
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Yea, thanks! Huge dip! Oil is still 84 bucks.
Karsten Vester
Karsten Vester Nov 10, 2021 11:55AM ET
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What in h… is API in this equation? They do nothing valuable to anybody now the data is so extreamly uncertain!!! Is it a part of the manipulation game?
wise money
wise money Nov 10, 2021 11:27AM ET
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Close to correct when you factor in SPR
Gail Goodman
Gail Goodman Nov 10, 2021 11:12AM ET
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Looks like sources who told you a draw down were incorrect.
shah icon
shah icon Nov 10, 2021 6:55AM ET
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does market go up or down due to inflation ?
New Jazenevd
New Jazenevd Nov 10, 2021 6:55AM ET
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The market goes up because of inflation. Btw, it does this for long time already. Didn’t you notice?
New Jazenevd
New Jazenevd Nov 10, 2021 6:48AM ET
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Inflation goes high and oil price is the prime beneficiary.
Mark Stallone
Mark Stallone Nov 10, 2021 2:42AM ET
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RELAX. It's all part of Building Back "Better". Let's go Brandon.
Jorge Argudo
Jorge Argudo Nov 10, 2021 12:23AM ET
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Inflation is going hihger. By design
Bellamy Fernades
Bellamy Fernades Nov 10, 2021 12:23AM ET
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need all please
Matt Novakovich
Matt Novakovich Nov 09, 2021 11:20PM ET
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surprise. everytime?
Mir Chang
Mir Chang Nov 09, 2021 10:36PM ET
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Dec /cl $90 calls would hit. Waiting on a big dip.
 
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