US Fed Chairman Powell says inflation is easing. US light crude oil gained more than 2% per barrel on Friday after Jerome Powell said the central bank was preparing to cut interest rates.
Brent crude futures rose $1.80, or 2.33%, to $79.02 a barrel. WTI crude futures rose $1.82, or 2.49%, to $74.83.
The Federal Reserve’s turn affects all commodities.
This week, both benchmarks hit their lowest since early January, after the U.S. government sharply lowered its estimate of jobs employers added this year through March, raising fears of a possible recession.
On Friday, Powell backed easing the Fed’s policies and said further cooling in the job market would not be welcome. He also expressed confidence that inflation could reach the U.S. central bank’s 2% target.
“The upside risks to inflation have receded. The downside risks to employment have also increased,” Powell said in a highly anticipated speech at the annual economic conference in Jackson Hole. “The time has come for policy to adjust. 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.”
The U.S. dollar index fell to around 101.45 ahead of the speech. A cheaper dollar typically increases demand for dollar-denominated oil from investors holding other currencies.
Meanwhile, it is important to note that falling oil inventories have been supporting oil prices somewhat.
For now, the oil market is on tight terms, with inventories falling by about 1.2 million barrels a day in the past four weeks and expected to continue through the rest of the [third quarter].
Recent data from China, the largest oil importer, points to a struggling economy and slowing demand for oil from refineries.
The U.S. and Israeli delegations began a new round of meetings in Cairo on Thursday to resolve disagreements over the proposed ceasefire.
Renewed pressure for a ceasefire in Gaza has also helped ease supply concerns and weighed on oil prices. The ceasefire talks to end fighting in Gaza have eased fears that the conflict will affect crude supplies.
Baker Hughes said Friday it reduced the number of oil and gas rigs for the second week in a row. The number of oil rigs remained steady at 483 this week, while gas rigs fell by one to 97.
