By Erwin Seba
HOUSTON (Reuters) – The U.S. gained more than 2% per barrel on Friday after U.S. Federal Reserve Chairman Jerome Powell said the central bank was preparing to cut interest rates.
futures rose $1.80, or 2.33%, to $79.02 a barrel. U.S. West Texas Intermediate (WTI) crude futures ended up $1.82, or 2.49%, at $74.83.
“The Federal Reserve pivot is real,” said Phil Flynn, senior analyst at Price Futures Group. “It affects all raw materials.”
This week, both benchmarks hit their lowest points since early January after the U.S. government sharply cut its estimate of the number of jobs employers added this year through March, raising fears of a possible recession.
On Friday, Powell backed an easing of Fed policy, saying further cooling in the labor market would not be welcome. He also expressed confidence that inflation is within the range of the US central bank’s 2% target.
“The upside risks to inflation have declined. And the downside risks to employment have increased,” Powell said in a highly anticipated speech at the Kansas City Fed’s annual economic conference in Jackson Hole, Wyoming. “The time has come for policy to adapt. The direction is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook and the balance of risks.”
It softened to about 101.45 prior to the speech. A cheaper dollar typically increases demand for dollar-denominated oil from investors who hold other currencies.
Morgan Stanley said in a note on Friday that a decline in oil inventories has provided some support to oil prices.
“For now, the oil market balance is tight, with inventories drawing around 1.2 million barrels per day over the past four weeks, which is expected to continue over the next four weeks. [the third quarter]”, the bank said.
Recent data from China, the largest oil importer, points to a struggling economy and declining demand for oil from refineries. A renewed push for a ceasefire in Gaza between Israel and Hamas has also eased supply concerns and depressed oil prices.
US and Israeli delegations began a new round of meetings in Cairo on Thursday to resolve differences over a ceasefire proposal.
Talks of a ceasefire to end the war in Gaza have eased fears that the conflict would impact crude oil supplies.
U.S. energy companies this week reduced the number of oil and drilling rigs for the second week in a row, energy services company Baker Hughes said Friday.
The number of oil rigs remained unchanged this week at 483, while the number of gas platforms fell by one to 97.
