June 22, 2024
Suit 25, Mangal Plaza, Nouakchott Street, Wuse Zone 1, Abuja- Nigeria.
OIL & GAS

Oil Prices Slip amid Concerns over Weak U.S. Jobs Data, Fed Rate Cut Timing

Oil prices dipped on Friday, signaling the potential for their most significant weekly decline in three months, as investors grappled with disappointing U.S. jobs data and speculation regarding the Federal Reserve (Fed)’s interest rate adjustments.

According to Reuters, by 1730 GMT, Brent crude futures for July had dropped by 46 cents, or 0.55%, to $83.21 a barrel, while U.S. West Texas Intermediate crude for June fell by 51 cents, or 0.65%, to $78.44 a barrel.

Both benchmarks are poised for weekly losses, driven by concerns that sustained high interest rates could slow down economic growth in the United States, the world’s largest oil consumer, as well as in other global regions.

Brent crude was on track for a weekly decline of approximately 7%, while WTI was heading for a loss of 6.5% for the week.

U.S. job growth in April fell short of expectations, accompanied by a cooling annual wage gain, according to recent data. Consequently, traders have increased bets on the Federal Reserve implementing its first interest rate cut of the year in September.

“The economy is slowing a little bit,” remarked Tim Snyder, economist at Matador Economics. “But the data gives a path forward for the Fed to have at least one rate cut this year.”

While the Fed opted to maintain rates steady this week and highlighted concerns about elevated inflation readings, which could postpone rate cuts, the anticipation of higher rates typically weighs on the economy and can reduce oil demand.

Giovanni Staunovo, an analyst at UBS, noted that the market is adjusting its expectations for potential rate cuts following the release of softer-than-expected monthly jobs data.

In other developments, U.S. energy companies reduced the number of oil and natural gas rigs for the second consecutive week, reaching the lowest level since January 2022, according to Baker Hughes.

The geopolitical risk premiums stemming from the Israel-Hamas conflict have eased amid discussions of a potential temporary ceasefire and negotiations with international mediators.

Looking ahead, the next meeting of OPEC+ oil producers, scheduled for June 1, may see an extension of voluntary oil output cuts if demand fails to rebound, according to Reuters.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.