Brent crude futures hit new highs on Thursday, hitting over $71 per barrel before retreating slightly. As of 10:26 a.m. GMT, Brent crude futures were trading at $70.83 per barrel after hitting a high of $71.05 earlier in the session. Both Brent and U.S. WTI futures are up nearly 60 percent since mid-2017. Oil prices have been driven higher by OPEC’s commitment to cut production and its high percentage of compliance among member states, as well as a seasonal demand increase. Despite an expected increase in production stateside, U.S. crude inventories declined 1.1 million barrels last week, the Energy Information Administration announced on Wednesday. According to Reuters, this is the lowest seasonal level since 2015.
The weaker dollar has also served as an impetus for driving prices higher as traders seek alternatives to dollar-based investments.
Though many countries are in favor of tightening oil prices, some analysts are concerned that rising prices may have an inflationary impact as transportation prices will rise, causing prices to rise on many consumer goods, and starting a potentially troublesome cycle of inflation.
Another Tack
The European Central Bank, holding its policy meeting today, will be forced to address inflation issues from another perspective as it weights the benefits and risks of future interest rate hikes in light of the euro’s recent strengthening against the dollar. The strengthening of the common currency could dampen inflation and threaten the results provided by the ECB’s monetary stimulus policy thus far. ECB President Mario Draghi is expected to keep policy stable for now and to hint towards a slowdown of potential interest rate hikes until the euro can firm up a bit. With the inflation rate still far from the ECB’s 2 percent target, Draghi will likely look to avoid any significant currency swings.
The ECB’s announcement is expected at 12:45 p.m. GMT.