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Oil futures were flat to slightly lower Friday afternoon, as a key U.S. dollar index rose to its highest since early June after Federal Reserve Chair Jerome Powell signaled policy makers are prepared to further hike interest rates if needed to bring down inflation.
Crude futures were on track to book a second straight weekly loss after ending a string of seven straight weekly gains last Friday.
Price action
-
West Texas Intermediate crude for October delivery
CL00,
+1.20% CLV23,
+1.20%
fell 22 cents, or 0.3%, to$78.85 a barrel on the New York Mercantile Exchange, on track for a weekly decline of 2.3%. -
October Brent crude
BRNV23,
+0.24% ,
the global benchmark, was down 4 cents, or less than 0.1%, at $82.88 a barrel on ICE Futures Europe, set for a 1.7% weekly decline. November Brent
BRN00,
+0.21% BRNX23,
+0.21% ,
the most actively traded contract, was flat at $83.36 a barrel. -
Back on Nymex, September gasoline
RBU23,
+3.65%
rose 1.9% to $2.834 a gallon, turning it up 0.5% for the week. September heating oil HOU23 was up 3.8% at $3.275 a gallon, for a 3.7% rise on the week. -
September natural gas
NGU23,
+0.64%
gained 0.7% to $2.537 per million British thermal units, trimming its weekly fall to 0.6%.
Market drivers
In an eagerly awaited speech at the Kansas City Fed’s annual symposium in Jackson Hole, Wyo., Powell delivered a speech widely described by analysts and economists as “hawkish,” but not as aggressive on the scope for further tightening as some market participants had expected. Powell also set a higher bar for further rate increases, economists said, while also warning that inflation remains too high.
MarketWatch Live: Stocks higher in choppy trade after Powell speech at Jackson Hole
The U.S. dollar rallied following Powell’s remarks, with the ICE U.S. Dollar Index
DXY
up 0.1% at 104.16 after earlier trading as high as 104.45, its highest since early June.
A stronger dollar makes oil more expensive to users of other commodities.
After a July rally, crude prices have pulled back in August, with the retreat tied in part to concerns over demand out of China, the world’s second-largest oil consumer. Crude has been boosted in part by supply cuts, including Saudi Arabia’s 1 million barrel-a-day reduction that began in July and is set to run at least through September.
“Recent economic data has not been encouraging and central banks are maintaining their hawkish positioning which could compound that pressure further going into the end of the year. But with supply cuts continuing to be extended, particularly the voluntary monthly reductions from Saudi Arabia and Russia, the market is being supported, perhaps in a new higher trading range above $80 in Brent,” said Craig Erlam, senior market analyst at Oanda, in a note.
Prospects of added supply from elsewhere, however, have also contributed to the weaker tone in August.
“Hopes are pinned on Venezuela, Iran and Iraq,” Barbara Lambrecht, commodity strategist at Commerzbank, said in a note.
U.S. officials were drafting a proposal that would ease sanctions on Venezuela’s oil exports if the country moves toward a free and fair presidential election, Reuters reported Wednesday afternoon.
Daily production in Iran has already increased by 350,000 barrels since the spring, Lambrecht noted, with exports recently exceeding 2 million barrels per day.
If survey-based production estimates news services, which are due to be published from the end of next week, confirm that the increased production trend has continued in August, prices are likely to fall further, even if OPEC supply remains at a low level due to Saudi Arabia’s massive production cut, she wrote.
The number of U.S. oil rigs fell this week by 8 to 512, according to oil-field-services firm Baker Hughes. That’s down 93 from a year ago.
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