Oil prices edge lower after a post-Fed rally
Oil prices headed lower Friday, easing back from their highest levels in more than a week, after a Federal Reserve official walked back dovish comments earlier this week from the central bank’s chairman.
Price action
-
West Texas Intermediate crude for January
CL00,
+0.06% CL.1,
+0.06% CLF24,
+0.06%
fell by 81 cents, or 1.2%, to $70.77 a barrel on the New York Mercantile Exchange, with prices trading around 0.7% lower for the week, FactSet data show. -
February Brent crude
BRN00,
+0.22% BRNG24,
+0.22% ,
the global benchmark, lost 54 cents, or 0.7%, to $76.07 a barrel on ICE Futures Europe, trading roughly 0.3% lower for the week. -
January gasoline
RBF24,
+0.80%
shed 0.4% to $2.1098 a gallon, while January heating oil
HOF24,
+2.22%
fell 0.1% to $2.5879 a gallon on Nymex. -
Natural gas for January delivery
NGF24,
+3.30%
gained 2.8% to $2.458 per million British thermal units.
Market drivers
New York Federal Reserve President John Williams on Friday told CNBC that it is “premature” to discuss whether it is time to cut interest rates. “We aren’t really talking about cutting interest rates right now,” Williams said in a CNBC interview.
Fed Chairman Jerome Powell on Wednesday, however, had said Fed officials were starting to discuss when to cut rates.
After the euphoria in the U.S. stock market of the Powell “pivot party” on Wednesday we got a “wake-up call” from Williams when he pushed back on market expectations of a March rate cut, Michael Hewson, chief market analyst at CMC Markets UK, said in market commentary.
Crude-oil prices had previously found some support from the Fed stating it was likely done hiking interest rates, StoneX’s Kansas City energy team, led by Alex Hodes, said in a Friday note.
Oil prices on Thursday had climbed by roughly 3%.
“Given the sharp move in bond markets since Wednesday it was perhaps felt necessary [by the Fed] to pour a little cold water on the moves of the last 48 hours, with Williams sent out to say it was premature to be thinking in terms of rate cuts,” said StoneX’s Kansas City energy team. “That’s not to say they wouldn’t happen next year but to be pricing in between [five to six] rate cuts next year as markets appeared to be doing seems to be a case of getting a little carried away.”
Oil prices had posted back-to-back gains, Wednesday and Thursday, after ending last week with their longest streak of weekly losses since 2018. Commodity-market experts have largely attributed the recent oil-price rise to a combination of short-covering and a weaker U.S. dollar.
The dollar has fallen 1.5% since the start of the week against major currencies, based on the move in the ICE U.S. Dollar Index
DXY,
a popular gauge of the greenback’s performance.
Most of the dollar’s drop followed Wednesday’s Fed press conference, where the latest batch of official projections showed the central bank penciling in three interest-rate cuts next year. The dollar pared some of these declines Friday, with the index trading 0.5% higher at 102.44.
