WTI crude oil futures rose above the $93 per barrel level today. The price increase may be supported by both macroeconomic data and statements from Saudi Arabia and OPEC.
The Organization of Petroleum Exporting Countries may decide to cut oil production in the event of a global recession, representatives of several countries in the alliance told The Wall Street Journal on Tuesday.
OPEC and its partners, led by Russia, have been closely coordinating oil production volumes, especially since the initial impact of the coronavirus pandemic in the first half of 2020. The alliance's members will meet again on September 5 to set an oil production rate, according to the BBN news service.
Meanwhile, crude inventories in the United States fell by 5.6 million barrels last week, according to data released by the American Petroleum Institute (API). The market consensus was for a much lower decline of 0.9 million barrels. The EIA's official government data will be released today. It is expected to reduce reserves by 933,000 barrels.
Probably by a combination of the above two factors, oil prices rose almost 4 percent on Tuesday. Counting from the June peak, however, oil has lost about 25 percent, probably due to growing concerns that a global economic slowdown could dampen consumption.
Does the Fed need to be aggressive?
The U.S. dollar index rebounded on Wednesday to near 108.7 and rose again toward its highest level in 20 years. USD appreciation may have been influenced by comments from US Federal Reserve officials.
Minneapolis Fed Chairman Neel Kashkari said that his biggest concern is that the extent of price pressures has been underestimated and that the central bank will have to be more aggressive for a longer period if inflation persists. This could mean tightening monetary policy even as the specter of a stronger brake on the economy looms. Kashkari added that the central bank may ease interest rate hikes when it becomes clear that inflation is heading toward 2 percent.
Further clues about the Federal Reserve's action plans may emerge later this week, when Jerome Powell, chairman of the Fed, addresses the annual symposium in Jackson Hole.
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service)
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