U.S. West Texas Intermediate crude oil futures erased all of its early gains and are now in a position to finish the week lower amid an escalation of the trade war between the United States and China, and uncertainty over Federal Reserve policy.
After trading sideways-to-higher most of the week, prices were flat early Friday as traders prepared for a keynote speech by Federal Reserve Chairman Jerome Powell that could set the near-term tone of the market.
Traders were expecting a quiet trade until 14:00 GMT when Powell is scheduled to deliver his speech at the central bankers’ symposium in Jackson Hole, Wyoming. However, volatility hit the market and prices plunged unexpectedly after China said it will slap new tariffs on U.S. goods.
According to reports, China said it would retaliate with new tariffs on another $75 billion worth of U.S. goods, including autos. The tariffs will range between 5% and 10% and will be implemented in two batches on September 1 and December 15.
Powell to the Rescue?
Fed chief Powell is expected to provide clues on whether the Fed will cut interest rates for a second time in two months to perk up the economy and prevent a global recession.
Simply stated, crude oil prices are likely to fall even further if Powell comes across as dovish by reiterating the Fed’s “mid-cycle adjustment” narrative. This refers to the central bank’s 25-basis point rate cut in July, which according to policymakers…