Oil prices steadied on Friday on a weaker dollar after the Federal Reserve kept rates unchanged, while bearish signs persisted that the world’s biggest crude producers would keep pumping at high levels to maintain market share.
The U.S. central bank decided against raising interest rates from historic lows on Thursday, saying uncertainty about global economic growth had forced its hand.
The oil market had mixed reactions to the decision, with the weaker U.S. currency supporting oil by making it cheaper for non-dollar traders, but concerns over global economic weakness providing some counterbalance.
“The perception of ‘ZIRP (Zero Interest Rate Policy) forever’ should provide some underlying support to the commodity complex,” said Olivier Jakob, a strategist at Petromatrix, a Swiss-based consultancy.
Brent crude LCOc1 traded up 63 cents at $49.71 a barrel at 0944 GMT, after touching an intraday low of $48.60. U.S. West Texas Intermediate (WTI) crude futures CLc1 were trading at $47 a barrel, up 10 cents.
Brent was set to make its first weekly gain in three weeks, hinting at a turn in momentum for a commodity that has declined nearly 30 percent since the spring.
Kuwait, a key member of the Organization of the Petroleum Exporting Countries (OPEC), said on Thursday the oil market would balance itself but that this would take time, indicating support for the group’s policy of defending market share despite falling prices.
Other sources at OPEC backed this view, saying they expected oil prices to rise by no more than $5 a barrel per year to reach $80 by 2020, with a slowing in rival non-OPEC production growth not enough to absorb the current oil glut.
Front-month U.S. crude futures have strengthened this week to their firmest versus Brent since the early days of the U.S. shale oil boom, knocking off 70 percent of their discount to the global benchmark to around $2 per barrel.
