Oil Prices Surge as Dollar Strengthens Ahead of Federal Reserve Chairman’s Speech
London, Aug 25 (Reuters) – Oil prices jumped over 1% on Friday as the dollar firmed up in anticipation of a significant speech by the head of the U.S. Federal Reserve, Jerome Powell. The market eagerly awaited hints on the outlook for interest rates.
Brent crude rose by 93 cents, or approximately 1.1%, reaching $84.29 a barrel by 1104 GMT. U.S. West Texas Intermediate crude also saw an increase of 87 cents, around 1.1%, at $79.92. Earlier in the session, both benchmarks climbed by more than $1.
Investor caution ahead of Powell’s remarks at the Jackson Hole Symposium propelled the safe-haven dollar to a 10-week high. This surge, accompanied by its largest increase in a month, left markets waiting for information on how long interest rates are expected to stay elevated.
A strong dollar tends to make oil more expensive for holders of other currencies, negatively impacting demand.
Morgan Stanley analysts wrote in a note that recent inventory draws have come through convincingly. They expect Brent crude prices to remain well supported around $80 per barrel, with crude likely to continue to be in a deficit for the remainder of this year before returning to a small surplus in early 2024.
However, John Evans, an oil broker at PVM, mentioned that the possibility of crude deficits is not a foregone conclusion.
While officials failed to reach agreement this week on a resumption of exports, talks between Turkey and Iraq’s semi-autonomous Kurdistan regional government on northern Iraqi crude oil exports are set to continue. Turkey stopped Iraqi oil flows via Ceyhan port on March 25 after losing a long-standing arbitration case brought by Iraq.
Iran’s oil minister has been quoted by state media as saying he expects the country’s crude oil output to reach 3.4 million barrels per day (bpd) by the end of September, despite the ongoing U.S. sanctions.
U.S. officials are reportedly drafting a proposal to ease sanctions on Venezuela’s oil sector, potentially allowing more companies and countries to import its crude oil.
Equinor, a Norwegian energy company, announced that it has started production at its extended Statfjord Ost field six months ahead of schedule.
“The support to oil prices from previous production cuts has ebbed,” noted analysts at Haitong Futures.
Several analysts anticipate Saudi Arabia to extend its voluntary oil production cut of 1 million bpd for a third consecutive month into October.
Reporting by Natalie Grover, Laura Sanicola, and Muyu Xu; editing by David Goodman and Jason Neely
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