Oil snaps four-day losing streak, gains 2% on US Fed rate cut bets ahead of Jackson Hole event; Brent at $77.6/bbl

Oil prices rebounded and snapped their four-day losing streak on Thursday, August 22, gaining two per cent, driven by rising expectations of US Fed interest rate cut signals ahead of the Jackson Hole event. US Federal Reserve chairman Jerome Powell will address policymakers on Friday, August 23.

Brent crude futures gained $1.55, or 2.04 per cent, to $77.6 a barrel. US West Texas Intermediate crude futures rose $1.52, or 2.11 per cent, to $73.45. Regarding domestic prices, crude oil futures last traded 0.03 per cent lower at ₹6,156 per barrel on the multi commodity exchange (MCX).

Also Read: Oil sheds initial gains, plunges $1 after US employment data offsets crude draw; Brent drops to $76/bbl

What's driving crude oil prices?

-On Wednesday, minutes of the US Federal Reserve's July meeting showed most Fed officials thought the central bank was on track for an interest rate cut next month. Analysts said that the likelihood of a rate cut went up and lower rates decrease the cost of borrowing and can create demand for crude.

-On Thursday, the US Labor Department said the number of jobless claims ticked up last week but appeared to be steadying near a level consistent with the gradual cooling of the labor market. This set the stage for interest rate cuts.

-Also supporting oil prices, a US government report on Wednesday showed crude, gasoline and distillate inventories fell by more than expected last week, a sign of demand picking up.

-In the Middle East, Iran-aligned Houthi militants continued attacks on international shipping in solidarity with Palestinians in the war between Israel and Hamas.

Also Read: Jackson Hole: When and where to watch US Fed chair Jerome Powell’s speech? Check date, time, venue details here

-A Greek-flagged oil tanker carrying 150,000 tonnes of crude that was evacuated by its crew after being attacked in the Red Sea now poses an environmental hazard, the EU's Red Sea naval mission "Aspides" said on Thursday.

-Investors are watching the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, which may reconsider its plan to unwind some output cuts in October gradually. OPEC has said the plan to raise output could be paused or reversed if needed.

Also Read: OPEC+ sticks to output policy of 5.86 million barrel pullback per day, hints at unwinding cuts from October

Where are prices headed?

Analysts said the latest labor data revision in the US had fueled recession fears, adding pressure on crude oil prices. Given that China is the world's second-largest consumer of crude oil, concerns over demand are also weighing on prices. 

However, they added that a decline in US oil stocks hopes for a Fed rate cut following soft US job market data, and the dollar index's weakness is supporting oil prices at lower levels, which could lead to a rise.

‘’The uncertainty surrounding an Israel-Hamas ceasefire deal could further support crude oil prices at these levels. We expect crude oil prices to remain volatile. Crude oil will likely find support at $70.70-$70.00 and face resistance at $72.30-$73.10. In INR terms, crude oil has support at ₹5,940- ₹5,880, with resistance at ₹6,110- ₹6,180,'' said Rahul Kalantri, VP of Commodities, Mehta Equities Ltd.