Oil price dips as markets await Fed steer

[August 23, 2019]  By Bozorgmehr Sharafedin

LONDON (Reuters) - Oil prices edged lower on Friday but remained on track for a weekly gain, with attention focused on a speech by U.S. Federal Reserve chief Jerome Powell for news on whether it will cut interest rates for a second time this year to boost the economy.

Brent crude futures <LCOc1>, the international benchmark for oil prices, fell 23 cents to $59.69 a barrel by 1150 GMT but was up about 1.7% on the week.

U.S. West Texas Intermediate (WTI) crude futures <CLc1> slipped by 12 cents to $55.23, up 0.6% this week.

"For now, it all comes down to Powell’s projected bias on Friday. Does he insist on the robustness of the U.S. economy or does he highlight the growing downside risks? Investors’ interpretation of Powell’s policy bias is set to sway markets," said FXTM market analyst Han Tan.

Traders will comb through Powell's speech later on Friday at a meeting of global central bankers at Jackson Hole, Wyoming, looking for clues on U.S. rates as economic headwinds strengthen and the U.S. China trade conflict shows no sign of abating.

(Graphic: Wall Street vs the Fed link: https://fingfx.thomsonreuters.com/
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"Some have blamed the hesitant tone (for oil prices) on an end-of-summer lull. Yet, in truth, the sense of unease stems from ongoing worries about the global economy," said Stephen Brennock of oil broker PVM.

Exacerbating concern over the possibility of recession, U.S. manufacturing industries registered their first month of contraction in almost a decade.

Pump jacks operate at sunset in an oil field in Midland, Texas U.S. August 22, 2018. REUTERS/Nick Oxford/File Photo

However, oil production cuts from OPEC members and Russia, as well as reduced exports from Iran and Venezuela because of U.S. sanctions, have continued to support crude prices.

Harry Tchilinguirian, of BNP Paribas, said the market had some bearish data, with a rise in Saudi Arabian oil exports while Russia’s crude output moved above its quota under an OPEC+ agreement and Russian state oil major Rosneft <ROSN.MM> helped to ship Venezuelan oil to China and India.

OPEC, Russia and other producers have, since Jan. 1, implemented a deal to cut output by 1.2 million barrels per day. The alliance, known as OPEC+, renewed the pact in July, extending the curbs to March 2020 to avoid a build-up of inventories that could hit prices.

French President Emmanuel Macron will meet Iranian Foreign Minister Mohammad Javad Zarif on Friday as world powers seek to salvage a 2015 international nuclear deal signed with Tehran.

Iran has said it will scale back compliance with the pact unless the Europeans find a solution enabling Tehran to sell its oil despite U.S. sanctions.

(Additional reporting by Florence Tan in Singapore; Editing by David Goodman)

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