Oil prices closed higher on Friday, supported by signals from Saudi Arabia that OPEC could cut production. Trade fluctuated as investors ignored the US Federal Reserve chief’s warnings of the coming economic distress.
Brent crude futures rose $1.65 to settle at $100.99 a barrel. West Texas Intermediate (WTI) crude futures rose 54 cents to $93.06 a barrel. Both contracts rose and fell $1 during the session.
Overall, Brent is up 4.4% for this week, while WTI is up 2.5%.
On Monday, Saudi Arabia pointed to the possibility of production cuts to offset the return of Iranian products to oil markets if Tehran signs a nuclear deal with the West.
The United Arab Emirates has become the latest OPEC+ member to state that it is aligned with Saudi Arabia’s thinking on crude oil markets.
The impression remains that Saudi Arabia is unwilling to tolerate any price drop lower than $90. Speculators may view this as an invitation to price increase without fear of more significant price drops.
Oil prices fell briefly after Fed Chairman Jerome Powell said tight monetary policy could be “for a while” to fight inflation, which could mean slower growth, a weaker job market and concessions for households and businesses.
The data showed a slight decline in inflation, and the Fed’s personal consumption expenditures price index fell to 6.3% year-on-year in July from 6.8% in June. Inflation expectations based on the University of Michigan’s measures also eased in July.
However, Powell said that “a single month’s improvement fell far short of what the Fed should have seen.” The market is worried that Powell is more hawkish when it comes to inflation.
Meanwhile, five sources with direct knowledge of the process said in a statement that some European Central Bank policymakers would like to discuss a 75 basis point rate hike at its policy meeting on September 8, even if recession risks emerge as the inflation outlook deteriorates.
Baker Hughes said the number of oil rigs in US supply, an indicator of future production, rose 4 to 605 in the week through August 26.
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.
