Oil rises more than 3% on positive US economic data and hopes of a Fed rate cut; WTI rises 4% and Brent approaches $80 a barrel

Oil prices rose on Friday, posting weekly gains of more than 3.5% as positive economic data and signals from Federal Reserve officials that they could cut interest rates as early as September eased demand concerns, while fears of escalating conflict in the Middle East continued to raise supply risks.

Brent crude futures rose 50 cents, or 0.6%, to $79.66 a barrel, while U.S. West Texas Intermediate crude futures rose 65 cents, or 0.9%, to $76.84, both benchmarks.

Brent gained more than 3.5% on the week, while WTI rose more than 4%.

“Crude oil is in recovery mode… as geopolitical tensions still appear to be a positive factor and intermittent fears of a recession have calmed down somewhat, at least for now,” said Dennis Kissler, senior vice president of trading at BOK Financial.

On Thursday, three Federal Reserve policymakers indicated they were more confident that inflation was cooling enough to cut rates. A bigger-than-expected drop in U.S. jobless claims data also helped underpin the recovery.

The number of Americans filing new claims for unemployment benefits fell more than expected last week, suggesting fears that the labor market is crumbling were overblown and that the gradual weakening of the job market remains intact.

China’s consumer price index also offered support, rising last month at a slightly faster-than-expected pace, data from the statistics bureau showed.

“The positive momentum was reinforced by Chinese inflation figures, which exceeded expectations. In this context, it would not be surprising if the price of a barrel were to test the $80 level,” said Pierre Veyret, technical analyst at ActivTrades.

“The price of a barrel has benefited from rising geopolitical tensions in the Middle East, which have fuelled fears of a potential conflict that could disrupt production in the region and reduce global crude oil supplies,” Veyret added.

Israeli forces stepped up airstrikes in the Gaza Strip on Thursday, killing at least 40 people, Palestinian medics said, in fresh clashes with Hamas-led militants.

Last week’s killing of senior members of the militant groups Hamas and Hezbollah had raised the prospect of retaliatory strikes by Iran against Israel, fuelling concerns about oil supplies from the world’s largest producing region.

Iran-aligned Houthi militants have also continued their attacks on international ships near Yemen in solidarity with Palestinians in the war between Israel and Hamas.

The leaders of the United States, Egypt and Qatar on Thursday called on Israel and Hamas to meet for talks on August 15 to finalize a ceasefire and hostage release agreement in Gaza.

The conflict between Russia and Ukraine also continued on Friday as Moscow moved additional tanks, artillery and rocket systems into its southern Kursk region as it battled for a fourth straight day to end a shock incursion by Ukrainian forces.

Meanwhile, the dollar index, which measures the currency’s value against six other currencies, fell 0.136% to 103.14 after three days of gains. A weaker dollar is helping demand as oil becomes cheaper for foreign buyers.

To further support prices, Libya’s National Oil Corporation declared force majeure at its Sharara oilfield from Wednesday, adding that it had gradually reduced output from the field due to the protests.

However, US oil rigs, an indicator of future production, rose by three to 485 this week.

Money managers reduced their net long positions in US crude futures and options in the week to August 6, the US Commodity Futures Trading Commission (CFTC) said.