Crude fell sharply Wednesday, breaking a three-day winning streak after the October Consumer Price Index showed a year-over-year jump of 6.2%, the highest reading in nearly 31 years.
Oil was pressured as President Joe Biden “responded by giving top priority to reversing inflation, targeting the sharp rise in energy prices in particular,” said Carsten Fritsch, an analyst at Commerzbank, in a note.
“To this end, he has tasked two bodies with discussing ways to reduce energy costs and to push back on market manipulation in the energy sector. One of the possible measures is bound to be the release of strategic oil reserves,” he said.
The dollar soared Wednesday in reaction to the inflation data, as bond yields rose, sending the ICE U.S. Dollar Index to a more-than-15-month high. The index, which measures the currency against a basket of six major rivals, rose another 0.2% on Thursday.
A stronger dollar can be a negative for commodities priced in the unit, making them more expensive to users of other currencies.
Meanwhile, the Organization of the Petroleum Exporting Countries, in its monthly report, left its forecast for 2022 growth in oil demand unchanged at 4.2 million barrels a day but trimmed its outlook for growth this year by around 160,000 barrels to 5.7 million barrels a day citing the effect of high prices.
That would put global oil demand at 100.6 million barrels a day in 2022, around 500,000 barrels a day above 2019 levels, while 2021 demand is seen at 96.4 million barrels a day.