(Bloomberg) — Oil rose after Federal Reserve Chair Jerome Powell signaled openness to an interest rate cut in September, countering an increasingly bearish supply outlook.
West Texas Intermediate edged higher to settle above $63 a barrel, while Brent settled near $68 after Powell’s highly anticipated prepared remarks were more dovish than some investors anticipated.
Crude futures stand to benefit from cheaper borrowing costs, which investors expect to spur economic activity and increase fuel demand. Lower rates also ease the financing and storage expenses that make holding oil positions more expensive when rates are high.
Oil’s gains are being limited by continued expectations that global markets will face a supply glut after peak summer demand ends. Crude has dropped more than 10% this year on concerns that US tariffs will hurt economic growth just as OPEC nations are returning idled production.
On the geopolitical front, White House trade adviser Peter Navarro blasted India again for continuing to buy Russian oil and said he sees US import levies on the nation doubling as planned on Aug. 27.
President Donald Trump has threatened to raise the import duties on Indian goods to 50%, half of which is due to purchases of Russian crude. Still, oil refiners in the South Asian nation have returned to buying the barrels after a brief pause, while an official from Moscow said he expects flows to be maintained.
There was little sign of progress toward a peace deal to end the war in Ukraine on Friday as President Volodymyr Zelenskiy said he’d had no contact with Russia on potential talks.
While Navarro’s latest comments offer a fresh reminder of the headline risks around Russian energy as Trump seeks to engineer an end to the war in Ukraine, oil has largely drifted in recent weeks amid thinner summer trading. As traders go back to their desks in the coming days, they’ll return to a market that’s largely expected to be oversupplied in the fourth quarter.
“The oil market is heading for a surplus in coming quarters that is both unusually large but also unusually well-anticipated by now,” Morgan Stanley analysts including Martijn Rats and Charlotte Firkins wrote in a note. “The former suggests prices will likely weaken; the latter suggests this is unlikely to turn into a disorderly sell-off.”
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