As U.S. Federal Reserve Bank Chair Jerome Powell said that interest rate reductions would be one of the central bank’s top priorities in the upcoming months, oil prices increased by more than 1% on Friday.
At 9:50 a.m. CDT (1450 GMT), Brent crude futures increased by $1.27, or 1.63%, to $78.49 a barrel, while U.S. West Texas Intermediate (WTI) crude futures increased by $1.33, or 1.81%, to $74.34.
According to Price Futures Group senior analyst Phil Flynn, “The Federal Reserve is pivoting.” It affects every commodity.
This week, the U.S. government drastically reduced its estimate of the number of jobs added by employers this year through March, sparking concerns about a potential recession and causing both benchmarks to fall to their lowest levels since early January.
Powell stated on Friday that he was confident that inflation will not exceed the 2% objective set by the U.S. central bank and that further cooling of the employment market would be undesirable. Powell also advocated the loosening of the Fed’s policies.
“The upside risks to inflation have diminished. 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 adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”
Before the speech, the U.S. dollar index weakened to roughly 101.45. Investors holding other currencies usually increase their demand for oil denominated in dollars when the dollar declines in value.
Oil prices have found some support due to a decrease in oil stockpiles, according to a note from Morgan Stanley on Friday.
“For now, the balance in the oil market is tight, with inventories drawing approximately 1.2 million barrels per day in the last four weeks, which we expect will continue in the balance of [the third quarter],” the bank said.
Recent data from China, the world’s largest oil importer, indicated a faltering economy and a reduction in refiners’ demand for oil. Concerns over supply and the price of oil have also been lessened by Israel and Hamas’ repeated efforts to secure a truce in Gaza.
Israeli and American delegates began a fresh round of talks in Cairo on Thursday in an attempt to work out disagreements over a proposed cease-fire.
Fears that the battle will affect the supply of crude oil have diminished as a result of the ceasefire negotiations between Israel and Hamas in Gaza.
