Stock Market News : U.S. light crude oil prices surged more than 2% per barrel on Friday following comments from U.S. Federal Reserve Chair Jerome Powell, indicating that the central bank is preparing to cut interest rates.
Brent crude futures climbed by $1.80, or 2.33%, to close at $79.02 per barrel. U.S. West Texas Intermediate (WTI) crude futures rose by $1.82, or 2.49%, ending the day at $74.83 per barrel.
“The Federal Reserve’s pivot is real,” said Phil Flynn, a senior analyst at Price Futures Group. “It’s influencing all commodities.”
Earlier this week, both oil benchmarks hit their lowest levels since early January after the U.S. government significantly reduced its estimate of job growth through March, raising concerns about a potential recession.
On Friday, Powell supported easing the Fed’s policies, stating that a further slowdown in the job market would not be welcomed. He also expressed confidence that inflation is nearing the central bank’s 2% target.
“The risks of inflation have decreased, while the risks to employment have increased,” Powell said in his much-anticipated speech at the Kansas City Fed’s annual economic conference in Jackson Hole, Wyoming. “It’s time 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.”
Ahead of the speech, the U.S. dollar index softened to around 101.45. A weaker dollar typically boosts demand for dollar-priced oil from investors holding other currencies.
Morgan Stanley noted on Friday that a reduction in oil inventories has helped support prices. “Currently, the oil market is tight, with inventories decreasing by approximately 1.2 million barrels per day over the past four weeks, a trend we expect to continue through the third quarter,” the bank stated.
Meanwhile, recent data from China, the world’s largest oil importer, suggests its economy is struggling, leading to reduced oil demand from refineries. Additionally, ongoing ceasefire negotiations in Gaza between Israel and Hamas have eased supply concerns, putting further pressure on oil prices.
U.S. and Israeli delegations began a new round of meetings in Cairo on Thursday to work out differences over a truce proposal. The ceasefire talks in Gaza have lessened fears that the conflict might disrupt crude oil supplies.
In the U.S., energy firms reduced the number of active oil and natural gas rigs for the second consecutive week, according to energy services firm Baker Hughes. The number of oil rigs remained unchanged at 483, while gas rigs dropped by one to 97.
Stock Market News (FAQs)
Why did crude oil prices increase on Friday?
Crude oil prices rose more than 2% on Friday after U.S. Federal Reserve Chair Jerome Powell indicated that the central bank is preparing to cut interest rates, which boosted market sentiment and impacted commodity prices, including oil.
What were the closing prices for Brent and WTI crude futures?
On Friday, Brent crude futures settled at $79.02 per barrel, up by $1.80 or 2.33%. U.S. West Texas Intermediate (WTI) crude futures closed at $74.83 per barrel, rising by $1.82 or 2.49%.
How did the Federal Reserve’s comments influence the oil market?
The Federal Reserve’s indication of potential interest rate cuts reduced concerns about a slowing economy and boosted demand for commodities like oil. A weaker U.S. dollar, resulting from these comments, also made oil cheaper for investors using other currencies.
What impact did the ceasefire talks in Gaza have on oil prices?
The ongoing ceasefire talks between Israel and Hamas helped ease fears of potential disruptions to crude oil supplies, which in turn put downward pressure on oil prices.
What is the current state of oil inventories and how does it affect prices?
Oil inventories have been decreasing by approximately 1.2 million barrels per day over the past four weeks, according to Morgan Stanley. This reduction in supply has helped support oil prices despite other market pressures.