Oil Price Rises Up To 5% As Dollar Falls, Russian Pricing Talks Add To Mix
NEW YORK (UrduPoint News/Sputnik – Nov 05, 2022) Oil prices rose as much as 5% on Friday as the dollar fell on expectations that the Federal Reserve could resort to higher interest rate hikes weak from December in its attempt to contain inflation.
Adding to the rally, media reported that the Group of Seven (G7) countries, along with Australia, have agreed to set a fixed price – rather than adopt a floating rate – on Russian oil.
West Texas Intermediate, the US benchmark for crude known as WTI, traded in New York, gained $4.44, or 5%, to $92.61 a barrel. WTI’s session high was $92.81, marking a nine-week high since breaking above $90 on Wednesday for the first time since Oct. 11. For the week itself, WTI was up 5.4%.
London-traded Brent, the global benchmark for crude, settled down $3, or 3%, at $97.67 a barrel. The global crude benchmark hit a session high of $98.74 earlier in the day.
The dollar index, which pits the US currency against the euro, yen, pound sterling, Canadian dollar, Swedish krona and Swiss franc, fell for the third time in four days due to speculation that the Fed might walk away from the interest rate hikes it has made. since June.
The Fed added 400 basis points to key rates this year, up from just 25 before, but barely made a dent in inflation, with the trend at its highest since the 1980s.
Several Fed officials spoke Friday about the possibility of an interest rate pivot, saying smaller hikes could do the same job of containing inflation for a longer period.
Investors, economists and business leaders have also been warning for some time that the United States could slide into recession just two and a half years after the latest downturn that erupted with the coronavirus pandemic measures at the mid-2020. One reason for that would be the Fed’s aggressive interest rate hikes, they said.
The US economy slumped in the first two quarters of the year, with back-to-back negative growth of 1.6% and 0.6% in gross domestic product that technically put the country in recession. Third-quarter GDP, however, came in at 2.6%.
Friday’s oil rally was further fueled by fears of retaliation from Moscow for the G7 plan to cap the selling price of Russian oil to limit the country’s ability to fund the war in Ukraine without choking off global supplies.
Russian President Vladimir Putin has warned in the past that his country will not export oil to countries participating in the G7 plan.