Oil Up Again For The Week As Expectations Grow For Another Fed Rate Cut

Growing geopolitical tensions also supported oil trading on Friday: File Image/Pixabay

Hope that the U.S. Federal Reserve would enact another modest rate cut was again enough cause for oil on Friday to eke out another session of modest daily and weekly gains, supported by supply concerns in the wake of the failure of peace talks between Ukraine and Russia.

Brent settled up 49 cents at $63.75 per barrel and climbed about 1 percent for the week; West Texas Intermediate settled up 41 cents at $60.08 per barrel and gained about 3 percent for the week.

CME Group's FedWatch Tool revealed that traders have priced in an 87 percent chance that the Fed will lower borrowing costs by 25 basis points when it meets next week, which in turn could stimulate demand.

Another potential boost to demand was U.S. president Donald Trump, who said he will discuss trade matters with Mexico and Canada after they gather in Washington for the 2026 World Cup draw.

Still, sentiment in the oil market overall remained stubbornly bearish, with the Organization of the Petroleum Exporting Countries (OPEC) among the factors cited by analysts as particular cause for concern.

Tamas Vargas, oil market analyst at PVM, remarked, "The lack of progress in the Ukrainian peace talks provides a bullish backdrop, but on the other hand, resilient OPEC production provides a bearish backstop; these two opposing forces make trading seemingly quiet."

While the peace talks continued on Friday in Florida, so did the hostilities between Russia and Ukraine, and the latter taking credit for an overnight attack on Russia's Syzran refinery and the Temryuk seaport suggested that any agreement may be unfeasible.

As for trading in the days ahead, Dan Ghali, a commodity strategist at TD Securities, pointed out that WTI settled above its 50-day moving average, a key level of support for the commodity: "This session should mark the first notable short covering program since algo selling activity exhausted itself, and the bar is low for subsequent CTA buying activity to hit the tapes over the coming week."

In other oil news on Friday, Rystad Energy calculated that if the U.S. were to send forces to attack drug cartels in Venezuela as many pundits suspect, this will significantly affect global benchmark prices due to the market having to replace that country's heavy crude production, estimated at about 1.1 million barrels per day (BPD).

Rystad stated, "Although the volume is small in terms of global trade flows, the quality is unique as over 67 percent of the output is heavy," and it added that the overall tightening of the heavy market would boost the prices for the heavy grades imported by the U.S., especially Canadian heavy crude grades.