Oil Buoyed By Vague Signs That Fed May Be Done With Rate Hikes

Meanwhile, Russia extends production ties with Iraq: File Image/Pixabay

Despite warnings that rates could be hiked again in the foreseeable future, the U.S. Federal Reserve keeping its benchmark interest rate unchanged at 5.25-5.50 percent at its latest meeting buoyed crude traders enough to break a three-day losing streak and lift prices.

Brent settled up $2.22 at $86.85 per barrel, while West Texas Intermediate settled up $2.23 at $82.67 per barrel.

The Bank of England also kept interest rates at 15-year highs at its latest meeting on Thursday, but BoE governor Andrew Bailey reiterated the sentiments of his American counterpart by stating, "Inflation is still too high; we will keep interest rates high enough for long enough to make sure we get inflation all the way back to the 2 percent target."

Sentiment was  mixed with news that a contraction in manufacturing activity in the euro zone deepened in October (causing traders to worry about demand), while in the U.S. the economy remained resilient with new unemployment claims increasing only slightly to 217,000 in the week to Oct. 28 (which caused some analysts to theorize that the Fed would pause any further rate hikes).

Ed Moya, senior market analyst at Oanda, said, "Energy traders are growing confident that the Fed is done tightening, given the recent soft labour market readings."

On the Israel/Hamas front, some Gaza refugees crossing into Egypt on Thursday as part of a Qatar-mediated deal that required agreement between Israel, Egypt and Hamas fortified traders' growing optimism that the conflict would not spread across the Middle East and disrupt oil supplies.

In other oil related news on Thursday, Shell reported a third quarter profit of $6.2 billion, higher than the $5.1 billion of the previous quarter but down significantly from the $9.45 billion reported for the same time period a year ago.

Stuart Lamont, investment manager at RBC Brewin Dolphin, said in a note, "With the geopolitical environment still volatile, oil prices look likely to continue recent rises which should mean a strong final quarter for Shell."

Also on Thursday, Russia's Lukoil representatives said the company has extended its development and production contract for Iraq's West Qurna 2 oilfield, with the intention of doubling oil output to 800,000 barrels per day (bpd).

The agreement is another step in the long-term strategic partnership between Lukoil and the Ministry of Oil of Iraq, and the development will include bringing new multi-well pads into production, commissioning oil and gas treatment facilities, construction of export pipelines, and tank battery expansion.