NEW YORK: Oil prices rise on Wednesday, with benchmark Brent futures breaching $80 a barrel for the first time since May, after US inflation data spurred hopes the Federal Reserve may have fewer interest rate hikes in store for the world’s biggest economy. US data showed consumer prices rose modestly in June and registered their smallest annual increase in more than two years. Markets expect one more interest rate rise, but oil traders hope that may be it. Higher rates can slow economic growth and reduce oil demand.

“This is the lowest number since the pandemic ... but it is important to keep in mind that this is still a transitory situation. But overall, traders are cheering this event,” said Naeem Aslam, chief investment officer at Zaye Capital Markets, describing the inflation figures.

Brent futures rose 39 cents, or 0.5%, to $80.33 a barrel by 1:02 p.m. EDT (1802 GMT), having risen by more than $1 earlier in the session. US West Texas Intermediate (WTI) crude was up 60 cents, or 0.8% at $75.43 a barrel.

Oil prices also drew support from a weaker dollar and optimism surrounding Chinese stimulus, said Fiona Cincotta, senior financial markets analyst at City Index.

Forecasts from the US Energy Information Administration (EIA) and the International Energy Agency (IEA) point to the market tightening into 2024.

The IEA expects the oil market to stay tight in the second half of 2023, citing strong demand from China and developing countries combined with supply cuts from leading producers. New forecasts from the IEA are expected this week.

“The oil balance gets tighter either when supply is downgraded, or demand is revised up. If both happens at the same time the change can be seismic,” said PVM analyst Tamas Varga referring to the EIA’s outlook.