NEW YORK, Sept 29 — Oil prices flirted with one-year highs on Thursday before falling in a bout of profit-taking, which tempted investors back into stocks after several days of losses over inflation fears.

Worries that elevated energy prices will keep interest rates high in Europe and the US pushed stocks down sharply in September, dousing hopes that central bankers could start easing monetary policy.

Instead, Brent crude hit US$97.69 a barrel on spot markets early Thursday, the highest price since November last year, before falling back.

New York’s main contract, West Texas Intermediate, hit US$95.03, a peak since August 2022.

Both the WTI and Brent closed lower on Thursday.

"Another leg up in oil prices has added to the market worries about sticky inflation, thereby stoking fears that interest rates will stay higher for longer,” said Russ Mould, investment director at AJ Bell.

Crude has been supported in recent sessions by supply concerns after Saudi Arabia and Russia extended output cuts until the end of the year, alongside a pickup in demand in key consumer nations including the United States and China.

News that crude stockpiles at a key US storage facility in Oklahoma had fallen to the lowest levels since July last year further boosted prices.

The dollar also retreated from strong recent gains made on expectations the Federal Reserve would probably raise US borrowing costs once more, and take a while before cutting them.

The European Central Bank is also unlikely to ease monetary policy anytime soon, analysts say, even though inflation in EU heavyweight Germany fell to 4.5 per cent in September. This is the lowest level since Russia’s invasion of Ukraine.

In the United States, Wall Street stocks closed higher as the yield on the 10-year US Treasury note eased, bringing relief to investors.

Investors have been "on edge” this week as the 10-year yield kept making new highs, said Angelo Kourkafas of financial firm Edward Jones.

"The biggest headwinds for the markets recently — rising yields, rising oil prices, rising dollar — all three are lower today,” he added.

"So, think of it as a relief rally in a sense.”

German recession cloud

A forecast that an expected recession in Germany this year could be more painful than investors think also cast a cloud over equities, though the euro managed to recover after days of weakness against the dollar.

Europe’s biggest economy could shrink 0.6 per cent this year, more than previously thought by leading economic institutes.

"The most important reason for this revision is that industry and private consumption are recovering more slowly than we expected,” said Oliver Holtemoeller from the Halle Institute for Economic Research, one of the five groups behind the forecast.

Against the yen, the dollar remains close to the 150-yen mark last seen in October 2022, leading Japanese authorities to say they are keeping an eye on movements and are ready to intervene to support their currency.

News that troubled Chinese property developer Evergrande suspended trading in its Hong Kong-listed shares compounded the overall caution, given the widespread potential impact of any financing problems for the company.

Key figures around 2040 GMT

Brent North Sea crude: DOWN 1.2 per cent at US$95.38 per barrel

West Texas Intermediate: DOWN 2.1 per cent at US$91.71 per barrel

New York - Dow: UP 0.4 per cent at 33,666.34 (close)

New York - S&P 500: UP 0.6 per cent at 4,299.70 (close)

New York - Nasdaq: UP 0.8 per cent at 13,201.28 (close)

London - FTSE 100: UP 0.1 per cent at 7,601.85 points (close)

Frankfurt - DAX: UP 0.7 per cent at 15,323.50 (close)

Paris - CAC 40: UP 0.6 per cent at 7,116.24 (close)

EURO STOXX 50: UP 0.7 per cent at 4,161.56 (close)

Tokyo - Nikkei 225: DOWN 1.5 per cent at 31,872.52 (close)

Hong Kong - Hang Seng Index: DOWN 1.4 per cent at 17,373.03 (close)

Shanghai - Composite: UP 0.1 per cent at 3,110.48 (close)

Euro/dollar: UP at US$1.0570 from US$1.0502 on Wednesday

Pound/dollar: UP at US$1.2203 from US$1.2134

Euro/pound: UP at 86.59 pence from 86.54 pence

Dollar/yen: DOWN at ¥149.28 from ¥149.64

— AFP