Oil Rises as Investors Parse Yellen Remarks for Rate-Hike Clues

JPMorgan's Michele: Oil Can Settle in at $42, $43
  • September rate gain consistent with Yellen speech: Fischer
  • Saudi Aramco says oil, gas, refining operating normally

Oil closed higher after swinging between gains and losses as investors parse a speech by Federal Reserve Chair Janet Yellen for signs of when the central bank will raise interest rates.

Futures climbed 0.7 percent Friday, trimming a weekly loss. Crude rose 2.4 percent earlier while the dollar slipped, boosting the appeal of commodities as an investment. Saudi Arabian Energy Minister Khalid Al-Falih said an output freeze will signify that producers are content with the market situation. All oil and gas facilities in Saudi Arabia are safe and operating normally, Saudi Arabian Oil Co. said. A projectile from Yemen caused a fire in a power relay facility, state-run Saudi Press Agency reported.

"Prices bounced back with a vengeance after Yellen began to speak," said Thomas Finlon, director of Energy Analytics Group LLC in Wellington, Florida. "The market is moving violently. I still think the market is overpriced based on the fundamentals, but when the dollar’s weak, crude is going to have a hard time not moving higher."

Oil entered a bull market Aug. 18, less than three weeks after tumbling into a bear market. Prices surged partly on speculation that informal discussions among members of the Organization of Petroleum Exporting Countries may lead to action to stabilize the market. A deal to freeze output was proposed in February, but a meeting in April ended with no final accord.

Inverse Relationship

West Texas Intermediate for October delivery rose 31 cents to settle at $47.64 a barrel on the New York Mercantile Exchange. Total volume traded was 10 percent below the 100-day average. The October contract fell 3 percent this week.

Brent for October settlement increased 25 cents to $49.92 on the London-based ICE Futures Europe exchange. Prices slipped 1.9 percent this week. The global benchmark crude closed at a $2.28 premium to WTI.

The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, fell as much as 0.6 percent before climbing 0.8 percent.

Yellen’s comments were consistent with the possibility of two hikes this year, Federal Reserve Vice Chairman Stanley Fischer told CNBC.

"The market’s whipsawed by the Yellen comments," said John Kilduff, partner at Again Capital LLC, a New York hedge fund focused on energy. "Crude prices have been highly reactive to the dollar today."

U.S. producers paused adding oil rigs this week, ending the longest run higher since April 2014, according to Baker Hughes Inc. data Friday. There were 406 active rigs in the country, unchanged from last week.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE