Oil Sparks Inflation Fears

Oil prices just topped $80 for the first time in 2024 after strikes on Russian oil refineries. Are we ever going to beat inflation?

BREAKING NEWS

Analysts are more worried than ever about inflation sticking around thanks to a surge in oil prices. What is going on? 

WHAT HAPPENED

Oil prices are getting squeezed on both sides thanks to a whole mess of developments worldwide. In the immediate term, Ukrainian drone strikes on a critical Russian oil refinery in Slavyansk have potentially disrupted up to 15% of Russia’s refining capacity. Even though Russian oil is under sanctions, the supply of that ‘cheap’ oil has helped keep prices low.

DEMAND SHOCK

Meanwhile, U.S. reserves are dwindling as demand starts to creep back up. Even more importantly, China just printed economic data that suggests they may actually be recovering. Manufacturing activity is up and unemployment is starting to deflate. As economic activity ramps up—China’s energy needs will spike as well. This has oil futures getting really hot in early trading. 

WHY IT MATTERS

Lower energy prices have been a critical facet of cooling inflation for the last two years. With oil creeping back up over $80 per barrel, Natural Gas prices are also starting to rise. This will be a boon to energy companies, but also really hurt a global economy trying to finally get out from under the weight of inflation. Treasury yields now top 4.3% as extended inflation fears intensify.