Oil Swings on Supply Shocks

Crude oil staged a huge rally throughout the week as OPEC members talked again about cutting production to prop prices upward toward $60 per barrel. The oil cartel has been unsuccessful thus far, but collaboration between its members could shock the global oil market higher.

The U.S. Department of Energy fueled the run up by reporting on Thursday morning that U.S. petroleum inventories unexpectedly tumbled by more than 14 million barrels, which helped boost prices to $47.75 per barrel.

By Friday morning, prices made a U-turn as traders took profits and sold their holdings as they considered that crude stockpiles are still near record highs, a sign that volatile prices may be here to stay.

Grains Brace for USDA Report

Grain prices climbed during the week, rallying in anticipation of next Monday’s USDA report. The monthly tally will show the agency’s best guess at the size of this year’s corn and soybean crops, which were both projected to be record size last month.

Prices were also boosted by new concerns about heavy rains hurting the soybeans and reports of early-harvested corn being lower quality than anticipated.

Despite this week’s price rally, some farmers and traders fear that the USDA could show an ever-increasing corn and soybean crop, which could knock prices back to dirt-cheap levels.

As of midday Friday, December corn traded for $3.40 and November beans neared $9.80 per bushel.

Traders Turn on Stocks and Bonds

The U.S. economy could “reach or even exceed full employment” soon, according to Federal Reserve official Eric Rosengren. While this is good news for job-seekers, optimism from the Fed caused panic among stock and bond futures traders and triggered a tumble.

Rosengren’s comments implied the Fed may finally be ready to raise interest rates soon in an effort to combat inflation. Economists fear that low unemployment and low interest rates can spark inflation, forcing them to carefully tailor interest rate policy between stimulating the economy and controlling inflation.

Higher rates typically hurt the stock market as they make it more expensive for corporations to borrow. Meanwhile, higher rates encourage investors to buy interest-bearing assets, eschewing commodities, stocks, and foreign currencies.