观点

As expected, energy inflation accelerated as gasoline and furnace oil prices rose from August, while food inflation continued to moderate.

Brent futures are trading lower from the open but have held onto levels above USD 105/b.

At the same time, we expect PPI inflation to accelerate further, driven mainly by higher crude oil refining costs.

Oil Prices Rebound on Renewed Supply Risks Weekly % ChangeCurrent* Week Ago 52-Week High 52-Week Low S&P 500 7747 7812 7819 6344 S&P/TSX Comp.

In particular, we see BSP raising rates by 25bps next week, bringing the policy rate to 5.25% from 5.00%, given higher oil prices and the risk of a Super El Niño, while we expect the Bank of Korea to keep rates on hold at 3.00% after back-to- back hikes.

This will continue to bode well for CNY appreciation though near-term external headwinds persist from a firm US dollar, elevated US yields and oil prices.

These releases will serve as key inputs for the BoC’s next interest rate decision on Oct. 28, as policymakers are wary that high oil prices could spill beyond gasoline prices into non-energy components and/or feed into rising business and consumer inflation expectations.

Energy inflation likely accelerated as gasoline and furnace oil prices rose significantly from August.

Middle East : Low inventories and higher shipping costs will keep oil and fuel prices elevated, with Brent futures forecast to average US$101/bbl in Q4 before easing to US$77/bbl by Q4 2027 as supply recovers.

Risks are two-sided: escalation could push Brent towards US$150/bbl, while an early US-Iran agreement could see a faster normalisation in supply.

For much of the year, fluctuations in oil prices – and thus the near-term inflation outlook – fed into market views of central bank policy, and longer yields as well.

Cartwright said that likely gives markets at least 10 to 15 weeks of oil and refined fuel before shortages bite in some regions, up from his earlier estimate of five to 10 weeks.

Cartwright said that suggests markets see the September recovery as temporary, and believe Iran still has significant control over Middle Eastern oil flows.

Oil prices are trading lower as the market is trying to calibrate its response to the geopolitical conditions in the Middle East.

Brent futures are trading down nearly 1.3% at USD 104.70/b while WTI is lower by 0.8% since the open at USD 94.32/b.

The IEA cut its oil demand estimate for 2026 to a decline of 2.6m b/d and revised lower its expectation for growth to recover in 2027 to 2m b/d, down by 600k b/d from its previous forecast.

The projects should support non-oil economic activity, strengthen domestic industrial capacity and create opportunities across local supply chains, reinforcing Saudi Arabia’s longer -term diversification objectives despite a more challenging regional economic environment.

• German wholesale prices rose 8.7% year on year in September, up from 6.8% and the fastest since February 2023, with mineral oil products up 48.8% and metals 24.9%; the monthly gain of 1.9% beat a 0.7% forecast.

We expect oil prices to trade lower into year-end.

Despite little improvement in the geopolitical environment, oil flows from the Persian Gulf have been trending higher with supply from the region returning to 70-75% of pre-war levels, although there are some estimates suggesting we could be back to as high as 80-90% of pre-war flows.

Failing that, time may be enough for oil prices to trend lower, assuming supplies from the region continue to hold up.

For now, we are holding onto our 4Q26 Brent forecast of $80/bbl and FY27 forecast of $71/bbl.

The other pain point for the oil market remains diesel, which will be a concern as we head further into the Northern Hemisphere winter.

Unfortunately for the natural gas market, we have not seen a similar recovery in LNG flows from the Persian Gulf as we have with oil.

• Also today: the delayed US crude inventory report, after an industry estimate showed a draw of 11.1 million barrels.

All of this is despite yesterday’s US CPI reading (recap here ) but somewhat compatible with slightly lower oil prices led by a buck decline in Brent.

FX implications – AI exporters vs oil importers On currencies, we remain bearish on those where the negative impact of higher oil prices outweighs the positive effects, if any, from the AI boom.

While we don't expect a sell-off, high real rates will be required to keep attracting portfolio inflows Higher oil prices are strengthening Azerbaijan's economic buffers Base is bliss: selectively dovish and FX-constructive Since the outbreak of Middle East tensions, the CIS-4 has weathered higher volatility, rising global inflation expectations and tighter core rates, easing some of our initial concerns.

Azerbaijan is more stable: higher oil prices reinforce its buffers, while the manat peg limits imported inflation.

When oil prices rise, virtually every household in the country sees energy bills rise.

Higher oil prices can simultaneously improve the overall purchasing power of the Canadian economy while squeezing households through higher gasoline and other energy costs.

That distinction has become increasingly important (and visible) in the current data as conflict in the Middle East sent oil prices soaring, raising costs for Canadian households, but also increasing the value of a key export.

Oil revenues then flow more broadly across the economy as taxes/royalties are paid to governments and redistributed either through increased spending or lower taxes (or reducing fiscal debt burdens).

Overall, the net impact of higher oil prices on the Canadian economy is likely neutral to slightly positive from a growth perspective with large but narrowly concentrated revenue increases offset by broadly base increased costs for most households.

Our base case forecast remains that the BoC will hold rates through the end of 2026 before beginning gradual hikes in early 2027 as strengthening domestic demand closes the economy’s spare capacity, and not simply because oil prices are elevated.

That said, RBI’s recent FX measures to curb speculations on the rupee may help temper downside pressure on INR, although higher crude prices remain a headwind.

THB also remains sensitive to the stronger US dollar and higher oil prices, which together raise the cost of Thailand’s energy imports and weaken the terms of trade.

Meanwhile, the IMF raised its 2026 global growth forecast to 3.1% from 3.0% in its latest World Economic Outlook, reflecting stronger-than-expected AI investment that has helped offset the drag from higher oil prices.

First, oil prices remaining above USD130/bbl through 1Q27 could shave 0.5ppt off global growth in 2027.

An escalation of renewed attacks would likely see investors price in a more prolonged conflict that would see crude oil prices move toward the peak earlier this year.

• Oil: Brent trades back above USD 106 as renewed attacks in the Middle East cloud the recovery in regional oil flows.

Our take We expect Singapore core inflation to average 2.0% this year, at the upper end of MAS's forecast range under our base case, which assumes oil prices moderate towards the end of the year.

Or note the resumption of energy market tensions since the last decision, including higher WTI and especially higher Brent that affects the east coast projects.

Crude oil imports rose sharply, reflecting both higher prices and larger volumes, as did imports of durable consumer goods, most likely supplied by Chinese manufacturers.

With the Democrats eager to check President Trump’s war powers, tension with Iran could ease and there is an increased likelihood that Gulf energy supplies would normalise, reducing pressure on oil prices and inflation.