Author: Ignacio Teson

Oil prices dropped after weaker-than-expected U.S. job growth in August, ending the week with steep losses as demand concerns outweighed OPEC+’s decision to delay an increase in supply.

On Friday, oil prices declined after the U.S. reported weaker job growth in August, marking a sharp weekly loss for the commodity. Concerns over demand overshadowed OPEC+’s move to postpone a planned production increase.

Brent crude futures fell by $1.63, or 2.24%, to $71.06 per barrel, while U.S. West Texas Intermediate (WTI) crude dropped $1.48, or 2.14%, to close at $67.67.

For the week, Brent lost nearly 9%, and WTI fell around 8%.

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U.S. government data released on Friday showed that employment grew less than expected in August, but the unemployment rate dropped to 4.2%. This suggested an orderly slowdown in the labor market, which likely doesn’t warrant a significant rate cut from the Federal Reserve this month.

The jobs report was somewhat weak, suggesting that the U.S. economy may be entering a downturn. Demand concerns from China also continued to weigh on oil prices.

On Thursday, Brent hit its lowest level since June 2023, despite a drop in U.S. crude inventories and OPEC+’s decision to delay planned increases in oil production.

U.S. crude inventories fell by 6.9 million barrels to 418.3 million barrels last week, compared to the expected decline of 993,000 barrels, according to a Reuters survey of analysts.

Oil prices remained near 14-month lows on Thursday, as concerns over demand in the U.S. and China, along with a potential increase in supply from Libya, outweighed a significant drawdown in U.S. inventories and OPEC+ announcing a delay in its planned production hike.

Brent crude futures dropped 1 cent, or 0.01%, to $72.69 per barrel, while U.S. West Texas Intermediate (WTI) crude fell 5 cents, or 0.07%, to $69.15 per barrel.

The U.S. Energy Information Administration (EIA) reported that energy companies withdrew 6.9 million barrels of crude from their inventories in the week ending August 30.

Talks between the Organization of the Petroleum Exporting Countries (OPEC) and its allies, led by Russia—known collectively as OPEC+—about postponing the planned production increases for October also helped support prices.

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OPEC+ agreed to delay the scheduled oil production hike for October and November, stating that they could curb or reverse the increases if necessary.

In Libya, an OPEC member, some tankers were allowed to load crude from storage, despite production remaining restricted due to political disputes over the central bank and oil revenues.

Meanwhile, recent U.S. economic data provided some relief regarding the health of the economy, as the market looks for clues on the Federal Reserve’s path for interest rate cuts.

The Fed raised rates aggressively in 2022 and 2023 to curb surging inflation, but it is expected to lower borrowing costs at its September 17-18 policy meeting. Lower rates could stimulate economic growth and boost oil demand.

During the session, both benchmarks fluctuated between $1 down and $1 up following news that OPEC+ was discussing delaying a potential production increase due to expected rising output in Libya.

Oil prices fell more than $1 per barrel on Wednesday in a volatile session, as traders grew concerned about demand in the coming months amid mixed signals from producers about increasing supply.

Brent crude futures closed down $1.05, or 1.42%, at $72.70 per barrel. U.S. West Texas Intermediate (WTI) crude futures lost $1.14, or 1.62%, to settle at $69.20 per barrel.

During the session, both benchmarks swung between $1 losses and $1 gains following reports that OPEC+ was considering postponing a planned production increase due to anticipated higher output from Libya.

In a broader selloff, Brent futures have dropped 11%, or about $9, in just over a week, hitting a low of $72.63 on Wednesday.

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Weak economic data from the United States and China heightened ongoing expectations of a global economic slowdown and weaker oil demand, contributing to a broader decline in global markets.

Meanwhile, traders believe the conflict that has halted Libya’s oil exports could soon be resolved, leading to an increase in crude supply.

This selloff shifted attention to what OPEC+’s response would be, as the group seemed poised last week to begin planned production increases in October. The latest data has fueled concerns about weaker-than-expected demand in China, the world’s largest crude importer, and the impact on U.S. consumption.