By Adedapo Adesanya
Oil prices rose more than 2 per cent a barrel on Friday after comments by US Federal Reserve Chairman, Mr Jerome Powell, indicated the central bank was preparing to cut interest rates.
Brent crude futures moved up by $1.80 or 2.33 per cent at $79.02 a barrel and the US West Texas Intermediate (WTI) crude futures finished up by $1.82 or 2.49 per cent at $74.83 per barrel.
On Friday, Mr Powell endorsed easing the US Federal Reserve’s policies, saying further cooling in the job market would be unwelcome. He also expressed confidence that inflation was within the US Central Bank’s 2 per cent target.
Market analysts believe that September would be the most probable date for the much-anticipated interest rate cut.
“The upside risks to inflation have diminished. And the downside risks to employment have increased,” Mr Powell said, adding “The time has come for policy to adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”
Support also came as the US Dollar index softened to about 101.45 ahead of the speech.
A cheaper greenback typically lifts demand for Dollar-denominated oil from investors holding other currencies, making it possible to buy more.
Morgan Stanley said in a note on Friday that a drawdown in oil inventories has somewhat supported oil prices, adding that the balance in the oil market is tight and expects that it will continue in the third quarter of the year.
Recent data from China, the world’s largest oil importer, has pointed to a struggling economy and slowing oil demand from refiners.
Meanwhile, a renewed push for a ceasefire in Gaza between Israel and Hamas has also helped ease supply worries and weighed on oil prices.
The delegations from the US and Israel started a new round of meetings in Cairo, Egypt on Thursday to resolve differences over a truce proposal.
Ceasefire talks to stop the war in Gaza have reduced fears the conflict would impact crude oil supplies.
For the second week in a row, US energy companies reduced the number of oil and gas rigs in operation, according to energy services firm Baker Hughes on Friday. The number of oil rigs remained steady at 483 this week, while the number of gas rigs decreased by one to 97.