The Saudi Arabian signals that OPEC might reduce output helped oil prices end the day higher on Friday, but trading was choppy as investors processed and ultimately discounted the head of the U.S. Federal Reserve’s warnings about impending economic hardship.
Futures for Brent crude increased $1.65 to close at $100.99 per barrel. West Texas Intermediate (WTI) crude futures in the United States increased 54 cents to close at $93.06 per barrel. Over the course of the trading session, both contracts changed by $1.
WTI was expected to rise 2.5 per cent while Brent gained a total of 4.4% for the week.
According to a source with knowledge of the situation who spoke to Reuters, the United Arab Emirates is the newest member of OPEC+ to declare that it shares Saudi Arabia’s views on the crude market.
The possibility of production cuts was raised by Saudi Arabia on Monday in case Tehran reached a nuclear agreement with the West, which would result in the return of Iranian barrels to the oil markets.
“The impression remains that Saudi Arabia is not willing to tolerate any price slide below $90. Speculators could view this as an invitation to bet on further price rises without the need to fear any more pronounced price declines,” Commerzbank said in a note.
With slower growth, a weaker job market, and “some pain” for households and businesses, tight monetary policy may be in store “for some time,” according to Fed Chair Jerome Powell. This caused a brief drop in oil prices. View More
The Fed’s personal consumption expenditures price index decreased from 6.8 per cent in June to 6.3 per cent in July, according to data, indicating a slight decline in inflation.
But “a single month’s improvement falls far short” of what the Fed needs to see, Powell said.
“The market is concerned that Powell sounded a bit more hawkish when it came to inflation,” said Phil Flynn, an analyst at Price Futures group in Chicago.
Even though recession risks are present, some policymakers at the European Central Bank want to discuss raising interest rates by 75 basis points at their policy meeting on September 8th, according to five sources with direct knowledge of the discussion who spoke to Reuters. The number of oil drilling rigs in the United States increased by 4 to 605 in the week ending on August 26, according to data released on Friday by Baker Hughes Co.
According to the US Commodity Futures Trading Commission (CFTC), money managers increased their net long positions in U.S. crude futures and options by 24,215 contracts to 179,039 during the week ending August 23.
(Adapted from EconomicTimes.com)