Oil prices fall sharply amid weak U.S. jobs data, oversupply fears in market
(MENAFN) Oil prices declined by 2 percent on Friday, ending the week with significant losses after data revealed a weaker-than-expected increase in U.S. jobs for August. This economic data overshadowed the support oil prices had received from the OPEC+ alliance's decision to delay an increase in oil output. brent crude futures fell by USD1.63, or 2.24 percent, settling at USD71.06 per barrel, marking their lowest level since December 2021. Similarly, U.S. West Texas Intermediate (WTI) crude futures decreased by USD1.48, or 2.14 percent, closing at USD67.67, the lowest since June 2023. Over the course of the week, Brent crude prices dropped by 10 percent, while WTI crude fell nearly 8 percent.
Despite the OPEC+ decision to postpone planned production increases and a reduction in U.S. oil inventories, oil prices remained under pressure. U.S. government data indicated that employment growth in August was weaker than anticipated, although the unemployment rate decreased to 4.2 percent. This suggests a moderate slowdown in the labor market, which may not necessitate a substantial interest rate cut by the Federal Reserve this month. Additionally, Brent crude prices had already reached their lowest level since June 2023 on Thursday, despite a notable drawdown in U.S. oil inventories and OPEC+'s production delay. U.S. crude inventories fell by 6.9 million barrels to 418.3 million barrels, a much larger decrease than the anticipated 993,000-barrel drop.
Further weighing on oil prices this week were developments in Libya, where rival factions are nearing an agreement to resolve a conflict that has significantly disrupted the country's oil exports. In response to these market dynamics, Bank of America revised its forecast for Brent crude prices in the second half of 2024, lowering the estimate from around USD90 per barrel to USD75. The adjustment reflects concerns about global inventory build-ups, weak demand growth, and the available spare capacity within OPEC+.
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