Oil Prices Rise Amid Economic Data and Geopolitical Tensions

By Arathy Somasekhar

HOUSTON (Reuters) – Oil prices settled higher on Friday, gaining over 3.5% weekly, driven by positive economic data and indications from Fed policymakers regarding potential interest rate cuts as early as September. This eased demand concerns, while fears of escalating Middle East conflicts raised supply risks.

Brent crude futures increased 50 cents (0.6%) to $79.66 a barrel, while U.S. West Texas Intermediate crude futures rose 65 cents (0.9%) to $76.84, with both benchmarks experiencing significant weekly gains—Brent up 3.5% and WTI over 4%.

“Crude is in a recovery mode… as geopolitical tensions seem to be a positive factor, and recession fears have calmed a bit, at least for now,” said Dennis Kissler, senior vice president of trading at BOK Financial.

A trio of Federal Reserve policymakers indicated on Thursday that they are increasingly confident inflation is cooling enough to warrant rate cuts. Additionally, a larger-than-expected decrease in U.S. jobless claims helped bolster this recovery.

The number of Americans filing new unemployment benefit applications fell more than anticipated last week, indicating that labor market fears may be overstated and gradual softening remains viable.

China’s consumer price index also rose at a slightly faster-than-expected rate last month, further supporting prices.

“Positive momentum was reinforced by Chinese inflation numbers exceeding expectations. In this context, it wouldn’t be surprising to see barrel prices testing the $80 level,” noted Pierre Veyret, Technical Analyst at ActivTrades.

Brent prices were buoyed by rising geopolitical tensions in the Middle East, leading to fears that potential conflicts could disrupt regional output and reduce global crude supply.

Israeli airstrikes have intensified across the Gaza Strip, with reports of at least 40 fatalities. The recent killings of senior Hamas and Hezbollah members have increased concerns over possible retaliatory strikes by Iran against Israel, further heightening supply fears.

Meanwhile, Houthi militants aligned with Iran continue attacks on shipping near Yemen in solidarity with Palestinians amid the Israel-Hamas conflict.

U.S., Egypt, and Qatar leaders called for negotiations between Israel and Hamas on August 15 to finalize a Gaza ceasefire and hostage release agreement.

The ongoing Russia-Ukraine conflict also remains tense, with Moscow increasing military presence in southern Kursk as it continues to combat a Ukrainian incursion.

The dollar index fell by 0.136% to 103.14 after three days of gains, making oil cheaper for foreign buyers.

Supporting prices, Libya’s National Oil Corp declared force majeure at its Sharara oilfield due to protests and reduced output. Conversely, U.S. oil rigs increased by three to 485 this week.

Money managers trimmed net long U.S. crude futures and options positions in the week ending August 6, according to the U.S. Commodity Futures Trading Commission (CFTC).