Myra P. Saefong and Joseph Adinolfi/MarketWatch

SAN FRANCISCO/NEW YORK
EnergiesNet.com 08 26 2022

Oil futures finished higher on Friday, scoring a gain for the week, as speculation surrounding a possible production cut by major oil producers helped provide some support for the oil sector.

That helped to offset pressure from indications that the Federal Reserve plans more interest rates hikes, which could raise the potential for a slowdown in energy demand, and progress toward an Iran nuclear deal that could eventually lead to more oil on the global market.

Price action

• West Texas Intermediate crude CLV22, 3.97% CL.1, 3.97% for October delivery rose 54 cents, or 0.6%, to settle at $93.06 per barrel on the New York Mercantile Exchange, with prices fluctuating between losses and gains for the session. Front-month contract prices ended 2.9% higher for the week, FactSet data show.
  
  
• The front-month October Brent crude oil contract BRNV22, 3.65% settled at $100.99 a barrel on ICE Futures Europe, up $1.65, or 1.7%, with prices up by 4.4% for the week.
  
  
• Back on Nymex, September gasoline RBU22, +0.67% added 4 cents, or 1.4%, to $2.8513 per gallon, ending down 5.5% for the week, while September heating oil HOU22, -2.42% gained 6 cents, or 1.5%, to $4.0076 per gallon, finishing with a weekly gain of 8.3%.
  
  
• Natural gas for September delivery NGU22, +1.09% settled at $9.296 per million British thermal units, down 8 cents, or 0.8%, with prices losing 0.4% for the week.

What analysts are saying

“Bullish sentiments” arising from talk of potential production cuts by the Organization of the Petroleum Exporting Countries and their allies — also known as OPEC+ — was offset by an “unenthusiastic mood” painted by Federal Reserve Chairman Jerome Powell, said Manish Raj, chief financial officer at Velandera Energy Partners.

Powell delivered a blunt message that the Fed will keep at the job of bringing inflation down until it is done and that the fight will be costly in terms of jobs and economic growth.

In his speech, he drove home the point that the Fed has an “overarching focus right now to bring inflation back down to our 2% goal.” he left the door open for a 0.75 percentage point interest hike in September.

“High interest rates will certainly lower economic activity and oil consumption is no exception,” Raj told MarketWatch.

Economic data released Friday showed a key gauge of U.S. inflation fell 0.1% in July on the heels of declines in gasoline prices.

However, oil prices finished Friday with a gain, and rose for the week. Prices found support as hopes for a nuclear deal with Iran were offset by comments about potential production cuts out of Saudi Arabia.

The comments from Saudi Arabia’s energy minister suggest international oil benchmarks won’t be allowed to trade below $90 per barrel without at least some verbal intervention from the Organization of Petroleum Exporting Countries and its allies, according to analysts at Commerzbank.

“Admittedly, sources close to OPEC stressed shortly afterwards that a production cut would probably only happen if Iran were to return to the oil market as a result of a new nuclear agreement. Nonetheless, the impression remains that Saudi Arabia is not willing to tolerate any price slide below $90,” Commerzbank team wrote.

marketwatch.com 08 26 2022