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Oil Swings As Traders Digest Hawkish Interest Rate-Hike Cues

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Oil Swings As Traders Digest Hawkish Interest Rate-Hike Cues

Oil struggled to find direction as traders digested comments made by Federal Reserve Chair Jerome Powell suggesting interest rates will rise, which carries the potential of slowing demand for crude.

West Texas Intermediate fluctuated near $92 a barrel. The Federal Reserve Chair signaled the US central bank is likely to keep raising interest rates and leave them elevated for a while to stamp out inflation.

Still, prices are on track for a weekly gain amid other signals pointing toward a tightening supply outlook. Crude rallied earlier this week after Saudi Arabia flagged potential cuts to OPEC+ output to stabilize a volatile market, a move supported by other cartel members including Iraq and Kuwait. 

“Powell reminded Wall Street that restrictive policy is required but we are not there yet, so recession fears and a deteriorating crude demand outlook is not warranted yet,” said Ed Moya, senior market analyst at Oanda.

Oil Swings As Traders Digest Hawkish Interest Rate-Hike Cues

Oil has lost almost a quarter of its value since June on escalating concerns over a global economic slowdown, but seems to have found a floor around $90 a barrel this month. The prospect of a revived nuclear deal with Iran, which could lead to a surge in exports, has added to bearish sentiment recently.

With inflation still rampant, US Federal Reserve officials revived market concerns that they would take continue to move aggressively to slow the economy.

“Restoring price stability will likely require maintaining a restrictive policy stance for some time,” Powell said Friday in remarks prepared for the Kansas City Fed’s annual policy forum in Jackson Hole, Wyoming. “The historical record cautions strongly against prematurely loosening policy.”

Elsewhere, soaring energy prices over the first half helped Chinese majors PetroChina Co. and Cnooc Ltd. post bumper profits, following global peers such as BP Plc and Exxon Mobil Corp. PetroChina also said Thursday that government stimulus was starting to lift oil demand in the world’s second-largest economy.

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