By Peter Nurse
Investing.com -- Oil prices climbed higher Friday, set for strong weekly gains as the idea of OPEC cutting production levels gained traction while U.S. demand showed signs of resilience.
By 08:35 ET (12:35 GMT), U.S. crude futures traded 0.5% higher at $92.94 a barrel, while the Brent contract rose 0.5% to $99.76.
U.S. Gasoline RBOB Futures were down 0.4% at $2.8009 a gallon.
Both contracts are on course for weekly gains of over 3%, helped by Saudi Energy Minister Prince Abdulaziz bin Salman flagging the possibility earlier in the week that the Organization of Petroleum Exporting Countries could cut production, as futures prices, which have fallen over 25% from their peaks earlier in the summer, are failing to reflect the tightness of the physical market.
In the days that followed a raft of OPEC members rallied behind Saudi Arabia’s message, giving credence to the idea that the cartel is relatively united behind its de facto leader.
The supply of energy globally, and particularly in Europe, remains exceedingly tight as a consequence of Russia’s invasion of Ukraine, and the sanctions that followed.
Russian energy giant Gazprom is set to severely limit the amount of gas western Europe receives through the Nord Stream pipeline, while operations at the Russian-held Zaporizhzhia nuclear power plant in southern Ukraine, Europe’s largest, have been halted.
This tightness could be partially eased if Iran’s 2015 nuclear deal with global powers is resurrected, potentially allowing an additional one million barrels per day of crude to enter the market if Tehran wins reprieve from U.S. sanctions.
“If it is in our best interests, the U.S. will agree to the Iran deal,” White House spokeswoman Karine Jean-Pierre said Thursday, as the U.S. responded to the latest proposal from the EU.
Also helping the market has been signs of relative strength in the U.S. economy, the largest consumer of crude in the world.
The U.S. economy contracted at a more moderate pace than initially thought in the second quarter, data showed Thursday, while U.S. crude inventories fell by much more than expected last week.
Attention now turns to Fed Chair Jerome Powell’s keynote speech at the central bank’s annual central banking symposium in Jackson Hole later in the session.
The market will be looking for a steer from Powell on what the Fed’s September policy meeting will decide upon in terms of interest rate hikes, amid concerns that the continuance of the aggressive monetary tightening will lead to a dramatic slowdown of growth, potentially hurting the demand for crude.
Additionally, a hawkish message could result in a stronger dollar, which makes oil, denominated in dollars, more expensive for foreign buyers.
Baker Hughes’ rig count and the CFTC’s positioning data round off the week.