Oil Prices Decline Due to Weak US Labor Data
Oil prices saw a significant decline on Thursday as weak labor data from the United States heightened concerns over an economic slowdown. The U.S. Labor Department’s report showed a sharp downward revision in employment gains for March 2024. The economy added 818,000 fewer jobs than initially estimated. This triggered fears of a looming recession in the U.S., causing a ripple effect across global markets.
The softer labor market further solidified expectations of an interest rate cut in September. However, there are rising concerns that the Federal Reserve might be too late in its response. This could lead to a hard landing for the U.S. economy, a scenario that bodes poorly for oil demand in the world’s largest fuel consumer. In Thursday’s trading, Brent oil futures fell by 0.1% to $75.95 a barrel, while West Texas Intermediate crude futures dropped 0.2% to $71.16 a barrel.
Inventory Data Offers Little Relief
Adding to the bearish sentiment, recent government data revealed a surprising draw in U.S. oil inventories. Despite a 4.6 million barrel shrinkage in the week leading to August 16, which far exceeded the expected 2 million barrel draw, the news did little to buoy oil prices. This outsized draw included significant declines in both distillates and gasoline stockpiles. It indicated that fuel demand remained robust, even as the summer travel season began to wind down.
Global Demand Outlook Remains Uncertain
Despite strong near-term demand, traders are cautious about the future. Concerns over a possible recession, coupled with weak economic readings from China, the world’s largest oil importer, are weighing heavily on the market. Additionally, there is unease over potential production increases outside the U.S., which could lead to an oil supply glut. These factors continue to overshadow any short-term bullish signs, keeping the market on edge.
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