FX.co ★ Rising oil prices provoke inflation

The Fed will be forced to step up the fight against inflation if oil continues to rise.

According to Bloomberg Intelligence, growing oil prices are exerting pressure on inflation, which could be a problem for the Fed, which is already struggling with high price pressures.

Senior commodities strategist from Bloomberg Intelligence, Mike McGlone, said that if oil prices further increase, the Fed will start to react more strongly.

He said that high oil prices mean high inflation. In fact, Brent oil has already risen by 25% since November. Oil traded near a 7-year high above $88 a barrel on Wednesday.

According to Reuters, OPEC insiders do not exclude an increase in oil prices by $100 per barrel in the next few months, especially amid the growing demand and limited supply.

The last time oil was traded at $100 was in 2014. OPEC believes that the pressure on oil prices will increase in the next two months.

Geopolitical factors are also pushing up oil prices. Such growth in oil prices could be a signal to sell risky assets. At the same time, McGlone added that since the Fed is busy fighting high inflation, it will be more difficult to support the markets.

This senior commodities strategist also explained that if oil prices start to decline, this will help reduce high inflation. One of the triggers that may indicate a potential peak in oil prices is the bottom of stocks.

It is possible that oil will reach its peak, as it did in 2014 and 2018. And according to the Department of Energy, the inversion of world stocks of crude oil and liquid fuels estimated for 2023 is more in line with prices close to $63 per barrel compared to current prices.