Oil prices rose on Friday, closing the week with gains exceeding 3.5%, driven by positive economic data and indications from Federal Reserve policymakers that interest rates might be cut as early as September. This eased concerns about demand, while fears of an escalating Middle East conflict continued to heighten supply risks.
Brent crude futures increased by 50 cents, or 0.6%, to settle at $79.66 per barrel, while U.S. West Texas Intermediate (WTI) crude futures rose by 65 cents, or 0.9%, to $76.84 per barrel. Over the week, Brent gained more than 3.5%, and WTI climbed over 4%.
“Crude is in a recovery mode… as geopolitical tensions still seem to be a positive factor, and on-again off-again recession fears have calmed a bit, at least for now,” said Dennis Kissler, senior vice president of trading at BOK Financial.
On Thursday, three Federal Reserve policymakers expressed increased confidence that inflation is cooling enough to consider rate cuts. Additionally, a larger-than-expected drop in U.S. jobless claims supported the oil market’s recovery. The number of Americans filing new unemployment claims fell more than anticipated last week, suggesting that concerns about a weakening labor market were overstated.
China’s consumer price index also offered support, rising slightly faster than expected in the previous month. “Positive momentum was further reinforced by Chinese inflation numbers that exceeded expectations. In this context, it wouldn’t be surprising to see the price per barrel testing the $80 level,” said Pierre Veyret, Technical Analyst at ActivTrades.
Geopolitical tensions in the Middle East, particularly the ongoing conflict between Israel and Hamas, have fueled fears of potential disruptions in oil supply from the region. Israeli airstrikes in Gaza and the killing of senior members of Hamas and Hezbollah have raised concerns about possible retaliatory strikes by Iran, which could impact global oil supply. Meanwhile, Iran-aligned Houthi militants have continued attacks on international shipping near Yemen.
The dollar index, which measures the currency against six others, fell by 0.136% to 103.14, making oil cheaper for foreign buyers and further boosting demand. Libya’s National Oil Corp also declared force majeure at its Sharara oilfield, gradually reducing output due to protests.
However, U.S. oil rigs, an indicator of future production, increased by three to 485 this week. Additionally, money managers cut their net long U.S. crude futures and options positions in the week ending August 6, according to the U.S. Commodity Futures Trading Commission (CFTC).