Oil Price Inflation Impact to Ease in 2027: DBS

DBS Chief Investment Officer for North Asia Yeang Cheng Ling believes that the impact of rising oil prices on US consumer price inflation will ease in 2027 due to normalizing supply and demand conditions.

Oil prices have already risen by around 50% from last year, but current US consumer price inflation assumptions are based on oil prices of around $100 per barrel. This high base set in 2026 will reduce the impact of any further increase in oil prices on inflation next year.

Cheng Ling pointed out that Saudi Arabia's oil exports have returned to normal levels, standing at around 6 million barrels per day in September, which is broadly in line with the country's average daily exports in 2025. He also noted that DBS does not expect oil prices to rise by another 50% from current levels.

A softer impact from oil prices could provide the US Federal Reserve with greater flexibility on monetary policy. Markets have priced in one more rate hike in 2026, but predicting the Fed's policy path has become more difficult.