DTN Oil

WASHINGTON (DTN) -- After choppy trading for most of the session, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled Friday's session broadly higher. That came after Federal Reserve Chairman Jerome Powell delivered a hawkish address on the pace and size of interest rate increases in coming months, warning of an extended period of below-trend growth amid "unacceptably high" inflation.

Returning to an in-person conference in Wyoming for the first time since the beginning of the pandemic in 2020, Powell gave a hawkish speech on Friday, sending a clear signal that the central bank would keep raising interest rates and leave them elevated for a while, pushing back against the idea the Fed would soon reverse course in mid-2023 that had circulated in the market.

"Restoring price stability will take some time and requires using our tools forcefully to bring demand and supply into a better balance. While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses," said Powell in his prepared remarks in front of the Jackson Hole audience.

Powell also acknowledged that while a lower inflation reading for July was welcomed, a single month's improvement falls far short of what the committee will need to see before taking the brakes of monetary tightening.

Last month, consumer price index registered no change after increasing 1.3% in June, bringing annualized pace of inflation to 8.6% as falling gasoline prices offset increases in the food and shelter indexes. Gasoline prices may very well reverse higher later this year on the back of an energy crisis in Europe along with overall tight supply fundamentals heading into colder months. Between now and Sept. 21, the market will get a fresh look at CPI and employment figures for August -- two critical data points that will determine the size of the coming rate increases.

The economy is already flashing signs of a marked slowdown in aggregate demand. Durable goods orders registered zero monthly increase in July after surging 2.2% at the start of summer. The figures show that businesses pulled back on orders for long-lasting goods amid other signs of a slowing U.S. economy. Further supporting this case, U.S. business activity in manufacturing sector unexpectedly fell to a 26-month low in August.

Data from the Energy Information Administration released midweek showed gasoline demand in the United States fell 914,000 barrels per day (bpd) last week to 8.434 million bpd, bringing the four-week average through Aug. 19 to just 8.9 million bpd -- a full 7% below last year's level. The incoming data poured cold water on expectations that falling prices at the gas pump might incentivize some Americans to take one more road trip before summer ends. American Automobile Association found that almost two-thirds of U.S. adults have changed their driving habits or lifestyle since March, with the top two changes used to offset high gas prices driving less and combining errands.

Some economists even suggest that the Federal Reserve should take it slow with interest-rate hikes as it risks tipping the U.S. economy into deep recession. In an interview on Bloomberg's "What Goes Up" podcast, Jeremy Siegel, the Russell E. Palmer professor emeritus of finance at the Wharton School, said price trends "on the ground" -- not within statistics -- make him believe that both the economy and inflation are already starting to slow, just five months into the Fed's rate-hiking campaign.

National Energy Assistance found nearly 20 million Americans fell behind on their utility bills this summer -- the worst crisis ever recorded by the group. Underpinning those numbers is a blistering surge in electricity prices, propelled by the soaring cost of natural gas.

At settlement, West Texas Intermediate futures for October delivery advanced $0.54 to $93.06 per barrel (bbl). International crude benchmark Brent futures rallied above $100 per bbl, up $1.63 from the previous session. NYMEX September RBOB futures gained 3.92 cents to $2.8513 per gallon, while the September ULSD contract advanced 5.85 cents to $4.0076 per gallon.

Liubov Georges can be reached at liubov.georges@dtn.com

Liubov Georges can be reached at liubov.georges@dtn.com