Singapore August 26 2022: Oil was on track for a weekly gain amid a tightening supply outlook, with investor attention turning to a key speech on the US economy later Friday by Federal Reserve Chair Jerome Powell.
West Texas Intermediate futures climbed above $93 a barrel after closing 2.5% lower in the previous session as traders digested hawkish headlines from Fed officials. Powell is expected to reiterate the resolve of the central bank to keep raising interest rates to rein in rampant inflation.
Crude rallied earlier this week after Saudi Arabia flagged potential cuts to OPEC+ output to stabilize a volatile market, a move supported by other cartel members including Iraq and Kuwait. Adding to the supply squeeze is curbed flows from Kazakhstan after damage to a key export terminal.
“It’s hard to justify reducing supply at current price levels, but the prospect of cuts suggests the floor for the market is not too far below the recent lows,” said ING Groep NV’s head of commodities strategy Warren Patterson.
Oil has lost almost a quarter of its value since June on escalating concerns over a global economic slowdown, but seems to have found a floor around $90 a barrel this month. The prospect of a revived nuclear deal with Iran, which could lead to a surge in exports, has added to bearish sentiment recently.
Soaring energy prices over the first half helped Chinese majors PetroChina Co. and Cnooc Ltd. post bumper profits, following global peers such as BP Plc and Exxon Mobil Corp. PetroChina also said government stimulus was starting to lift oil demand in the world’s second-largest economy.
Powell is scheduled to speak at 10 a.m. Washington time, marking the highlight of the two-day Jackson Hole Symposium. Kansas City Fed President Esther George — who votes on monetary policy this year — said the Fed hasn’t yet raised interest rates to levels that are weighing on the economy and may have to take them above 4% for a time.
“There’s currently a disconnect in sentiment,” said James Whistler, managing director of brokerage Vanir Global Markets. “On one side, you have the Saudis hinting at futures being under-priced versus the realities of the cash market. On the other, you have a hawkish Fed fueling fears of rising interest rates and the growing prospect of an Iran deal.”
