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Societe Generale links crude outlook to potential CPI surprises
The firm says its oil and diesel price paths for the next 12 months are designed to estimate US and Eurozone CPI surprises ahead of scheduled releases.
Societe Generale’s analysts are using their forecasts for Brent, West Texas Intermediate (WTI), and diesel prices to estimate forward-looking inflation surprises for the US and Eurozone, according to FXStreet.
The approach is built around an energy-centric framework, where the analysts connect oil price moves to CPI outcomes, using 12-month crude and diesel price paths derived from factors such as spreads and inventories, and refining cracks for diesel.
In its model, the firm forecasts Brent with a proprietary method that links spreads and inventories, then derives a WTI forecast by assuming an average $5 per barrel discount to Brent.
For diesel, the analysts say they examine recent trends in refining cracks to produce a price forecast, with the overall goal of providing estimates for CPI surprises before official data is released.
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