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Kenny Fisher

Crude has continued its late-week rally. In Friday’s European session, WTI is trading at $54.61, up $0.68, or 1.27%. WTI is currently at its highest level since October 1. Brent crude is trading at $60.04, up $0.50, or 0.84%.

Soft U.S. Inflation Points to Slowing Economy

The U.S. dollar was broadly lower on Thursday, as consumer inflation dipped in September and missed the forecasts. Headline CPI dropped to a flat 0.0%, only the second time this year that CPI has failed to post gains. There was no relief from Core CPI, which slowed to 0.1%, down from 0.3% a month earlier. The soft inflation numbers are the latest sign of weaker economic activity in the economy. Second-quarter GDP fell to 2.0%, and the manufacturing sector has been hampered by weak global conditions and the ongoing U.S-China trade dispute. This could also put strong downward pressure on oil prices, as a weaker domestic economy means will likely translate into reduced demand and lower prices for crude.

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Investors Hoping for Mini-Trade Deal

U.S. and Chinese negotiators resumed trade talks in Washington on Thursday. Previous rounds have ended in failure, but there could be better news this time around. The reason? The current talks are expected to focus on reaching a limited trade deal, rather than a broadly comprehensive agreement which has proven elusive. The talks will likely focus on avoiding further tariffs which would exacerbate the bitter trade dispute between the world’s two largest economies. The U.S. has threatened to raise tariffs on $250 billion in Chinese goods from 25% to 30% next week, and further tariffs are scheduled for December. However, the sides are likely to steer away from the thorny issue of intellectual property. If the sides make progress in the current round of talks, this would boost the economies of both countries, and demand for oil could increase and boost crude prices.

WTI/USD 4-hour Chart
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