Oil Prices Rise On Signals OPEC Might Cut Output
2 mins read
Published on August 27, 2022
Oil prices ended higher on Friday, boosted by signals from Saudi Arabia that OPEC could cut output, but trading was volatile as investors digested and ultimately shrugged off warnings from the head of the U.S. Federal Reserve about economic pain ahead.
Brent crude futures rose $1.65 to settle at $100.99 a barrel. U.S. West Texas Intermediate (WTI) crude futures rose 54 cents to settle at $93.06 a barrel. Both contracts rose and fell by $1 throughout the session.
Overall, Brent gained 4.4% for the week, while WTI was set to rise 2.5%.
The United Arab Emirates became the latest OPEC+ member to state it is aligned with Saudi Arabia's thinking on crude markets, a source with knowledge of the matter told Reuters.
On Monday, Saudi Arabia flagged the possibility of production cuts to offset the return of Iranian barrels to oil markets should Tehran clinch a nuclear deal with the West.
"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.
Oil prices briefly fell after Fed Chair Jerome Powell said tight monetary policy may be in store "for some time" to fight inflation, meaning slower growth, a weaker job market and "some pain" for households and businesses.
Data has shown some small decline in inflation, with the Fed's personal consumption expenditures price index falling in July to 6.3% on an annual basis, from 6.8% in June. Inflation expectations based on the University of Michigan's measures also eased in July.
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.
Meanwhile, some European Central Bank policymakers want to discuss a 75 basis point interest rate hike at a Sept. 8 policy meeting, even if recession risks loom, as the inflation outlook is deteriorating, five sources with direct knowledge of the process told Reuters.
In U.S. supply, the oil drilling rig count, an indication of future production, rose by 4 to 605 in the week to Aug. 26, Baker Hughes Co said on Friday.
Money managers raised their net long U.S. crude futures and options positions in the week to Aug. 23 by 24,215 contracts to 179,039, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.
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Brent crude futures rose 1.8%, to settle at $76.69 a barrel, while U.S. West Texas Intermediate crude (WTI) ended $1.23 higher at $70.90.
Brent crude settled down 1.2%, to $74.99 while West Texas Intermediate U.S. crude futures fell 1%, to $69.26 a barrel.
Brent crude futures fell by 78 cents to settle at $75.91 a barrel. U.S. West Texas Intermediate crude futures slid by 94 cents, to end the session at $69.96 a barrel.
According to the International Energy Agency (IEA), Russia's total exports of oil and petroleum products in February 2023 fell to 7.5 million barrels per day (bpd), from an average amount of 7.7 million bpd in 2022 (7.5 million bpd in 2021).
Fuel demand in February hit its highest level in at least 24 years, data from the website of the Petroleum Planning and Analysis Cell (PPAC) showed this month.