Fueling Strategy: Please keep tanks topped today/tonight, Saturday AM wholesale prices will go UP 1.5 cents – Be Safe
NYMEX Crude $ 47.64 UP $.3100
NY Harbor ULSD $1.4972 DN $.0122
NYMEX Gasoline $1.5128 UP $.0014
NEWS
Oil futures managed to hold on to a modest gain on Friday, but finished well off the session’s highs as the U.S. dollar moved sharply higher. Comments from Federal Reserve Chairwoman Janet Yellen, at a closely watched symposium on Friday in Jackson Hole, Wyo., pointed to the potential for an increase in interest rates as early as next month, but she also said action by the central bank will still depend on coming economic data. Fischer, in an interview with CNBC, said Yellen’s speech was “consistent” with a possible two rate hikes this year. Those comments offered significant support to the greenback, prompting oil prices to slip back from their highs.
October West Texas Intermediate crude rose 31 cents, or 0.7%, to settle at $47.64 a barrel on the New York Mercantile Exchange. It was trading at $47.39 before Yellen’s speech and touched highs above $48 as she spoke. For the week, prices lost about 3% following gains over the last three weeks, according to FactSet data. October Brent on London’s ICE Futures exchange rose 25 cents, or 0.5%, to $49.92 a barrel, easing back from session highs well above $50 and finishing around 1.9% lower for the week. “In light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal-funds rate has strengthened in recent months,” Yellen said in the speech. She sent a strong signal the U.S. central bank is preparing to increase rates as soon as next month—and Fischer’s comments furthered that assumption. An increase in U.S. interest rates tends to lift the dollar, which would make oil more expensive for traders who conduct business in other currencies.
The U.S. ICE Dollar Index saw choppy trading after Yellen’s comments, then climbed after Fischer’s CNBC interview. The index was up nearly 0.9% at 95.586 by the time oil futures settled. “It looks like trading in oil (and most other commodities for that matter) is all about the dollar,” said Tyler Richey, co-editor of The 7:00’s Report. “Oil surged higher on a knee-jerk reaction inversely to the earlier plunge we saw in the dollar index, not anything specific to oil market fundamentals.” Oil prices then eased back as the dollar rallied.
Stefan Wieler, vice president of Goldmoney Inc., said that “longer-dated oil prices have been moving up since the beginning of this year as the market reassessed the Fed’s willingness to raise rates,” and that Yellen’s speech did “little to change that, despite it’s slightly hawkish tone.” Still, “both from a fundamental perspective and from a Fed policy perspective, the lows in longer-dated oil prices are likely behind us,” he said. “The fundamentals look slightly weaker for spot prices given the record high petroleum inventories, but we expect that global inventories begin to peak soon and start to normalize, which should lend support to spot prices too later this year.”
Baker Hughes said Friday that the number of active U.S. rigs drilling for oil was unchanged at 406 in the latest week, implying a halt to the recovery in activity following eight straight weeks of rig increases. Richey said that the oil market’s focus remains on “next month’s [output] ‘freeze meeting’ between global producers, which is continuing to influence a short seller strike [and that] is inherently bullish for the near-term.”