DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange advanced more than 2% on Thursday, buoyed by a risk-on sentiment in financial markets after U.S. Federal Reserve Chairman Jerome Powell signaled the central bank might be done with its most aggressive rate hiking campaign in nearly two decades as investors positioned ahead of the U.S. non-farm employment report scheduled for the Friday morning release.

The U.S. labor market likely added 179,000 new jobs in October, a marked step down from the 336,000 reported for the month of September, as hiring in leisure and hospitality is seen slowing into the start of the fourth quarter. Job creation in the manufacturing sector is also expected to ease as a result of the United Auto Workers (UAW) strike. Softer labor market data would certainly reinforce the case for the Federal Reserve to conclude its monetary tightening cycle that lifted the federal funds rate to a 22-year high over the span of 17 months.

The FOMC left rates unchanged on Wednesday for the second consecutive meeting in the current 5.25% and 5.5% range. Although the move was widely expected by markets, comments by Fed Chairman Powell did little to raise expectations for additional tightening over the next four meetings. As of Thursday afternoon, the CME Group's Fed Watch tool indicates no better than a 25% chance of a rate hike through mid-2024.

The Fed's decision to hold rates steady follows a string of unexpectedly solid macroeconomic data for the third quarter that risks a second wave of inflation. The economy grew at the fastest pace in over two years over the recent three months, the labor market remains tight despite signs of rebalancing between supply and demand for workers, and consumer spending continues to surprise to the upside.

Separately, a private survey conducted by Reuters revealed Organization of the Petroleum Exporting Countries (OPEC) produced 27.9 million bpd in October some 180,000 bpd above September's level. This marked the third consecutive month of production increases for the 13-member cartel. African producers, namely Nigeria, Angola and Gabon led the increase in OPEC's output, offsetting declines posted by Saudi Arabia and other Gulf producers. Meanwhile, Iran's oil production hit 3.17 million bpd in the reviewed month the highest since the Trump administration reimposed sanctions on Tehran in 2018. In recent months, Iran has been gradually increasing its oil production along with crude exports, particularly to China as Washington seems to have stepped down sanctions enforcement on Tehran.

Saudi Arabia maintained its crude output at some 9 million bpd in accordance with its voluntary cuts and despite the recent data suggesting Russia has been increasing its crude oil exports.

At settlement, West Texas Intermediate December futures climbed to $82.46 bbl, lifted by a sharp drop in the U.S. dollar index that lost more than 0.73% against foreign currencies in overnight trading. The greenback rallied to a fresh four-week high 106.715 on Wednesday. The international crude benchmark Brent for January delivery advanced $2.22 to $86.85 bbl. NYMEX December ULSD spiked $0.0640 to settle at $3.0255 gallon and front-month RBOB on NYMEX gained to $2.2460 gallon, up by $0.0605 gallon.

The Dow Jones Industrial Average rallied 529 points, while the S&P 500 added 1.83% to Wednesday's rally.

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