By Barani Krishnan
Investing.com - Uncertainty over Fed policy and continued tensions over Iran are keeping oil prices trapped in their mixed trend.
U.S. West Texas Intermediate crude rose ahead of Fed Chair Jerome Powell’s two-day testimony to Congress beginning Tuesday as traders gave the benefit of doubt to bets that the central bank will order a rate cut after all in July. Powell will have a chance to reinforce the Fed’s position on interest rate policy with his remarks, though the market has no idea if he’s still leaning toward a rate cut after Friday’s resurgent U.S. jobs report for June. U.K. Brent oil fell on mixed bets on how U.S.-Iran tensions would play out.
New York-traded WTI crude settled up 15 cents, or 0.3%, at $57.66 per barrel. It had slid in earlier Asian and London trading, falling to as low as $57.31.
London-traded Brent, the benchmark for oil outside of the U.S., settled down 12 cents, or 0.5%, to $64.11 per barrel . Brent fell to as low as $64.06 earlier.
WTI dipped initially as it appeared that “good news on the jobs front was bad news for the rate cuts,” said Phil Flynn, senior market analyst for energy at the Price Futures Group in Chicago.
A slew of speeches by the central bank’s top officials this week could feed the obsession for a rate cut, driving oil prices as much as the OPEC and EIA monthly reports due on Thursday and Friday, respectively.
There are a number of scheduled speeches by Fed officials this week, including Powell's two days of testimony and a speech late Monday from St. Louis Fed President James Bullard. Bullard voted for a rate cut at the Fed's June 18-19 meeting. In addition, minutes of the June meeting will be released Wednesday.
While gold traders would typically be glued to every one of these, those in the oil market are also expected to pay particular attention to the events, given the pressure wrought upon the central bank for a rate cut at its July 30-31 meeting.
Investing.com's Fed Rate Monitor Tool still suggests a 100% chance the Fed will cut its key federal funds rate from 2.25%-2.5% to 2%-2.25% in July.
Fed Chair Powell said in a recent speech “an ounce of prevention is worth more than a pound of cure,” a hint that the central bank might lean toward a so-called insurance cut to head off a potential economic slowdown.
Yet, some market participants have scaled back expectations that a July cut is almost a certainty after a 224,000-strong jobs growth in June signaled the economy may be too strong for an easing. The forecast jobs expansion was only 160,000.
“The oil market is caught in a bind and does not know which way to go or trend,” Stephen Brennock, analyst at PVM Oil Associates in London, told Bloomberg.
Outside of the impact of policy moves on the dollar, tension in the Middle East continued to simmer in the background, though there was little clarity on what these would ultimately mean to crude prices.
Iran admitted over the weekend that it had increased uranium enrichment beyond the purity threshold agreed in a nuclear deal that Washington pulled out of last year, according to Iranian news agency ISNA.
Speaking on Sunday, U.S. President Donald Trump warned that Tehran “better be careful” on the decision which he claims to be a step towards the development of nuclear weapons.
“The oil market is caught in a bind and does not know which way to go or trend,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd. in London.