Oil rig pumpjacks, also known as thirsty birds, extract crude from the Wilmington Field oil deposits area near Long Beach, California, on July 30, 2013.
David Mcnew | Reuters
Crude oil futures rose Wednesday as Federal Reserve Chair Jerome Powell indicated that interest rates will likely come down this year though the central bank is moving cautiously.
The West Texas Intermediate contract for April gained $1.58, or 2.02%, to $79.73 a barrel. May Brent futures added $1.15, or 1.4%, to $83.19 a barrel.
Traders will be closely watching Powell’s testimony before the House Financial Services Committee on Wednesday for more detail on the central bank’s monetary policy plans for the year.
“We believe that our policy rate is likely at its peak for this tightening cycle,” Powell said in prepared remarks released head of his testimony. “If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year.”
“But the economic outlook is uncertain, and ongoing progress toward our 2 percent inflation objective is not assured,” the Fed chair said.
Lower interest rates typically stimulate the economy, which leads to more demand for crude.
Tamas Varga, an analyst at oil broker PVM, told clients in a note Tuesday that uncertainty surrounding interest rate cuts is “public enemy No. 1” of a protracted oil rally.
“The Fed chair’s testimony and the ECB interest rate decision on Thursday could revive hopes for a June reduction in borrowing costs,” Varga wrote in a research note.
The U.S. Energy Information Administration will release weekly data on the U.S. crude stockpile data later this morning.
Oil prices have been creeping higher this year, booking two consecutive months of gains, as OPEC+ has slashed production and geopolitical tensions continue to simmer in the Middle East.
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