Oil set for first weekly gain since October on Fed relief rally

Oil is poised to eke out its first weekly gain in almost two months as dovish signals from the US Federal Reserve unleashed a bullish pulse across markets.

The global benchmark Brent exceeded $US77 a barrel after rising more than 4 per cent in the prior two sessions. It’s up about 1.6 per cent this week.

Treasuries rose and the dollar weakened after Fed chairman Jerome Powell said that the US central bank is now focusing on when to cut borrowing costs, though another policymaker said there’s not much talk of rate cuts at the moment. A softer greenback boosts the appeal of commodities priced in the currency. That countered growing signals of a recession in Europe on Friday.

The modest move higher comes after seven straight weeks of declines that brought futures to the lowest since June just before the Fed meeting. A surge in exports from non-OPEC countries including the US, and concerns over a weakening demand outlook, are pressuring prices, while there’s also some scepticism over whether all OPEC members will adhere to the deeper voluntary cuts.

“We believe that the concerns about an oversupply are exaggerated,” Commerzbank analysts including Barbara Lambrecht wrote in a note. “Although a short-term setback cannot be ruled out in the event of weak economic data, we generally expect prices to climb.”

The International Energy Agency on Thursday added to the bearish outlook, slashing its estimates for global oil demand growth this quarter by almost 400,000 barrels a day as economic activity weakens. The Paris-based consumer organisation continues to expect growth to almost halve next year, to about 1.1 million barrels a day.

Bloomberg