Oil Prices Hit New 2023 High. What Does That Mean For Inflation?

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Published: Sep 4, 2023, 14:54 GMT+00:00

A long list of the world’s most powerful Wall Street banks have described the current economic climate as “The Golden Age of Trading”.

The Dominance of Saudi Arabia in the Oil Market and Its Impact on Commodities and Inflation

You certainly cannot talk about Commodities without mentioning Energies – And that’s because Crude Oil is whipping up an inflationary storm that is sending prices flying to fresh record highs.

It’s becoming more evident, day by day, that Saudi Arabia now controls the Oil market and is determined to push prices back above $100 a barrel.

Historically since the 1970s, every time Saudi Arabia and its OPEC alliance cut production to prop up Oil prices – the United States would immediately respond by releasing more Oil out of its Strategic Petroleum Reserves in a bid to defend market share. But more importantly, to slam Oil prices back down.

However with America’s Strategic Petroleum Reserves now drained to the lowest level since 1984, unfortunately, on this occasion, America won’t be coming to the rescue any time soon.

That’s bullish news for Commodity traders, but bad news for monetary policymakers in their fight against inflation!

Over the last month, Oil prices have been on a blistering run following Saudi Arabia’s announcement to extend its 1 million barrel per day production cut.

Currently, WTI Crude Oil prices are trading at new 2023 record highs of $85 a barrel. While Brent Crude Oil prices are trading above $88 a barrel – also the highest price point seen this year.

Both benchmarks have clocked up a whopping gain of over 21% since mid-August – with a long list of Wall Street banks now calling for prices to top $100 a barrel by year-end.

The Unprecedented Surge in Agricultural Commodities Driven by Global Warming and Its Inflationary Implications

Elsewhere in the Commodities markets, the disruptive impact of Global Warming and Climate Change has sent Agricultural Commodities from Orange Juice, Coffee, Sugar, Corn, Wheat, Cocoa, Soybean and Rice prices skyrocketing to all-time record highs.

And this could just the beginning!

As traders know – there is a strong correlation between Commodities and Inflation. When Commodity prices accelerate at a red-hot pace, so does Inflation.

According to the U.S Federal Reserve’s own economists, the uptick in Agriculture and Energy prices is a very reliable indicator that inflation could be heading back up in the fourth quarter of the year.

In other words, a “second wave” of inflation on the way.

Extraordinary times create extraordinary opportunities. When you consider the full magnitude of events that are currently unfolding, it comes as no surprise to see why Commodities are everyone’s favourite trade right now!