OIL FUTURES: Crude prices fall on pessimistic US inflation data

Crude oil futures were lower in late afternoon trading in Asia on Oct. 11 as hotter-than-anticipated US core inflation data weighed on the complex.

At 4:10 pm Singapore time (0810 GMT), the ICE December Brent futures contract was down 65 cents/b (0.82%) from the previous close at $78.75/b, while the NYMEX November light sweet crude contract fell 60 cents/b (0.79%) to $75.25/b.

The US Consumer Price Index -- an indicator of inflation -- rose 0.2% on the month in September, data from the US Bureau of Labor Statistics showed late Oct. 10.

The headline index rose above the anticipated 0.1% level, analysts said. Worse still, core consumer prices, excluding volatile items like food and energy, increased 0.3% on the month in September, exceeding the expected 0.2%.

"Oops. Inflation in the US came in hotter than expected in September, both on a monthly and yearly basis ... Nothing looked encouraging in that inflation report for the Federal Reserve doves," Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said.

Trepidation over macroeconomic conditions in the world's largest crude oil consumer continues to weigh on the market, as initial jobless claims rose 33,000 on the week to 258,000 in the week ended Oct. 5, data from the US Department of Labor showed Oct. 10.

"... The combination of higher-than-expected inflation and uglier-than-expected jobs data is simply bad for growth prospects; it means that the Fed must deal with inflation first and let growth slow down while it gets prices under control," Ozkardeskaya added.

"But this is a temporary pause for breath [as further data and details are sought], not a debilitating paralysis for markets," Vishnu Varathan, managing director at Mizuho, said.

Varathan remains optimistic about the broader disinflation trend, attributing the confidence to the Federal Open Market Committee's conviction, with key members saying on Oct. 10, "[Inflation is] definitely headed in the right direction; the overall trend for inflation ... is clearly moving down."

"What is more, details of diminished price pressures from dwellings are encouraging for sustaining the disinflationary trend. The upshot is that there is nothing in the data that knocks the Fed off-course from further, albeit calibrated, easing into 2025 [for now]," Varathan added.

Brent crude prices, despite slipping, are currently holding at key support levels of $75.05/b, market analysts at IG said.

"On Wednesday, it slid to $75.05/b, sitting right within key support made up of the early and late August lows at $75.24-$74.97/b. While it holds, a minor bounce toward the $80.00/b region is expected to be seen. Failure at $74.97/b would open the way for the $70.00/b region to be back in the frame, though," Axel Rudolph, market analysts at IG, said.

The market's attention is now on announcements for further details on China's fiscal stimulus, as the finance ministry is slated to provide clarity on additional easing policies Oct. 12.

"... Their announcement should live up to high market expectations to prevent investors' enthusiasm from entirely fading. The expectation is a Yuan 2 trillion package, ten times the number pronounced by authorities earlier this week," Ozkardeskaya said.

Dubai crude

Dubai crude swaps and intermonth spreads were higher in midafternoon trading in Asia on Oct. 11 from the previous close.

The December Dubai swap was pegged at $76.48/b at 3:33 pm Singapore time (0733 GMT), up $1.12/b (1.49%) from the previous Asian market close.

The November-December Dubai swap intermonth spread was pegged at 53 cents/b, stable over the same period, and the December-January intermonth spread was pegged at 41 cents/b, widening 1 cent/b.

The December Brent-Dubai exchange of futures for swaps was pegged at $2.09/b, up 11 cents/b.