Western Texas Intermediate (WTI) crude oil prices gained over 9% in the past week, rising from a year-to-date low of $64.41. The benchmark US crude oil is currently trading at $75.60 per barrel, a 1.74% increase from its opening price on Friday. The rise in oil prices comes after Kurdistan halted its oil exports through Turkey, leading to a 450K barrel-per-day shortage. In addition, the Organization of Petroleum Export Countries (OPEC) agreed to maintain its current crude output production in a meeting on Monday.
Investors' sentiments have been boosted by the inflation data reported by the Department of Commerce in the US. Although the Personal Consumption Expenditure (PCE) Index rose, it was below expectations. The core PCE, which excludes volatile items such as food and energy, was 4.6% year-on-year, lower than estimates. As a result, the odds that the US Federal Reserve (Fed) will halt tightening its monetary policy have increased. The CME FedWatch Tool shows that the probability of a pause in policy lies at 49.6%.
The outlook for oil prices and the US Dollar is dependent on the Fed's decisions regarding its policy. A less aggressive approach to rate hikes could help to keep the Dollar in check, while the halt in Kurdistan's oil exports could lead to a further rise in oil prices. OPEC's current crude oil output is estimated at 28.90 million barrels per day for the current month, which is a decrease of 70K BPD compared to February. The current output is also more than 700K BPD lower than what was recorded in September, which could further impact oil prices in the coming months.
Overall, the rise in oil prices and the potential pause in the Fed's tightening policy are positive signs for investors. However, market volatility could continue to be a factor, depending on geopolitical tensions and economic data from major economies around the world.
