Oil Prices Steady Lower, But Losses Smothered by Rate Cut Optimism By Investing.com


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Investing.com– Oil prices fell Thursday, halting a recent rally as traders awaited further clues from Federal Reserve Chair Jerome Powell on future monetary policy.

At 09:05 ET (1405 GMT), futures were trading 0.7% lower at $78.58 a barrel and the contract fell 0.6% to $82.49 a barrel.

Powell will speak once again

Powell will testify to Congress again later Thursday, the second day of his two-day testimony this time in the Senate.

Powell’s assurances about the likelihood of interest rate cuts by the end of the year had boosted oil prices on Wednesday, but comments from his colleague, Minneapolis Fed chief Neel Kashkari, tempered that optimism.

Kashkari said he expects no more than two, or even one, rate cuts in 2024, citing concerns about sticky inflation. His comments echoed similar warnings from many other Fed officials that sticky interest rates will prevent the central bank from cutting rates sooner.

Powell also reiterated concerns about sticky inflation during his testimony on Wednesday, saying the central bank needed more conviction that inflation will reach its annual target of 2%.

Data released late Thursday showed the number of Americans filing for unemployment benefits remained unchanged last week as the job market continued to gradually slow.

Additionally, layoff announcements in the United States rose 3% last month, reaching the highest level in 11 months, as automation-related restructuring continues to take its toll, according to a report released Thursday.

Attention now shifts to February data, due on Friday, for further guidance on the world’s largest economy.

Chinese trade data offers support

The crude oil market had received a boost late Thursday after China beat forecasts in January-February, suggesting global trade is turning a corner in an encouraging sign for policymakers as they try to shore up a stuttering economic recovery.

China posted a 5.1% increase in imports in the first two months of 2024 from a year earlier to around 10.74 million barrels a day, customs data showed on Thursday, as crude purchases rose to meet fuel sales during the Lunar New Year holiday.

The data comes just days after Beijing set a largely disappointing economic growth target for 2024 at 5%, the same as 2023.

This caused concerns about Chinese demand to return to markets, as the Chinese government also provided little insight into its plans for further stimulus measures to support economic growth.

US inventories add to positive supply signals

Also providing support was news that the United States showed a lower-than-expected increase in the week ending March 1, as more refineries resumed operations after an extended winter pause.

and inventories also saw excessive reductions, fueling notions that supplies in the world’s biggest fuel consumer were tightening.

Signs of lower US supplies fueled optimism that global oil markets would tighten in 2024, after the Organization of the Petroleum Exporting Countries and its allies said they would commit to reducing current supplies until the end of June.

Signs of widespread conflict in the Middle East have also fueled bets on supply disruptions in the region, especially amid delays in ceasefire talks between Israel and Hamas.

“We still expect Brent oil prices to reach the upper limit of the $70-$90 range this summer driven by a modest deficit, and reach a peak of $87 a barrel in July,” Goldman Sachs analysts said in a note.

(Ambar Warrick contributed to this article.)

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