Oil prices drop more than 2% following a poor US jobs report
Oil prices dropped on Friday as the expectation for energy consumption was lowered by a disappointing U.S. jobs report, but after OPEC and affiliated producers meet over the weekend, swollen supplies might increase much more.
Down $1.49, or 2.22%, Brent crude futures ended the day at $65.50 a barrel. In the end, U.S. West Texas Intermediate crude fell $1.61, or 2.54%, to $61.87.
Eight OPEC+ producers are scheduled to meet on Sunday to discuss increasing output further, according to a Reuters story on Wednesday. Despite experts’ expectations that they would decline, U.S. crude stocks increased by 2.4 million barrels last week.
According to Price Futures Group senior analyst Phil Flynn, “it’s kind of a perfect storm.” It began to decline after the OPEC story broke. Not very useful was the jobs report. That implies a decline in the market.
In its much-awaited employment report released Friday, the Labor Department’s Bureau of Labor Statistics said that nonfarm payrolls in the United States grew by just 22,000 jobs last month, following an upwardly revised 79,000 gain in July. According to Reuters’ poll of economists, payrolls would increase by 75,000 posts following a previously announced 73,000 gain in July.
A mild bias has been observed in the initial August job count, whereas further revisions have shown a strong prejudice. The range of estimates was between 144,000 new jobs and no new jobs.
According to Flynn, pressure to lower interest rates will come from the dismal jobs report.
For the market, the jobs report “is a bad data point,” according to Again Capital partner John Kilduff.
There are increasing expectations that the Organization of the Petroleum Exporting Countries (OPEC+), which includes allies like Russia, would decide at its summit on Sunday to increase the supply of barrels in order to reclaim market share.
In reference to OPEC+, which supplies almost half of the world’s oil, he stated, “They always seem to aggravate what’s going on in the market.”
Over a year ahead of schedule, the group would begin to unwind a second layer of output cutbacks of roughly 1.65 million barrels per day, or 1.6% of global demand.
We think that a major downward pressure on oil prices would result from an agreement among the eight OPEC+ nations to raise output once more. A supply surplus is already a serious issue, after all,” Commerzbank analysts wrote in a note.
Market support is still provided by supply risks. European leaders were told by U.S. President Donald Trump on Thursday to cease purchasing Russian oil, according to a White House official.
Any reductions in Russia’s crude shipments or other supply disruptions might raise oil prices worldwide.
“There remains the risk that Western powers could ramp up sanctions against Russia in an attempt to compel President Putin to the negotiating table,” analysts from JP Morgan stated on Friday.
The recent appearance of Indian Prime Minister Narendra Modi and Russian President Vladimir Putin at a parade in Beijing alongside Chinese President Xi Jinping, according to Kilduff, indicated that Russian oil supply was still part of the global supply chain, despite Trump’s demands.
