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Oil Prices Dip Following U.S. Employment Report
Oil costs were down about 2% on Friday, setting the stage for a weekly decline, after U.S. employment stats diminished the likelihood of immediate reductions in interest rates in the world's leading economy, potentially affecting crude oil demand.
Prices were also affected by sluggish growth in China and a potential deescalation of Middle East tensions.
As of midday Eastern Standard Time, Brent crude futures had decreased by $1.31 (1.7%) to $77.39 per barrel, while U.S. West Texas Intermediate crude futures had fallen by $1.47 (around 2%) to $72.35.
Both benchmarks were poised for approximately a 7% loss for the week.
Economies Sustain High Interest Rates
Major economies such as the United States and the Eurozone look to maintain high interest rates, which often curb economic growth and oil demand, in the near future.
Friday's data revealed that U.S. employment figures for January surpassed expectations, limiting the possibility of the Federal Reserve implementing interest rate cuts in the near future. This data led to the dollar strengthening against all major currencies.
As stated by Kpler analyst Matt Smith, "The possibility of interest rate reductions was pushed further back due to the significant increase in job creation."
In Europe, a policymaker from the European Central Bank indicated that it might be premature to implement interest rate cuts in the Eurozone.
China's Economic Recovery and Ceasefires Impact Oil Prices
Worries about China's economic resurgence persist, with the International Monetary Fund predicting that China's economic expansion will decrease to 4.6% in 2024, and continue to diminish to about 3.5% in 2028.
Earlier in the week, unverified reports of a ceasefire between Hamas and Israel led to a more than 2% drop in oil prices, with a postponement possibly reducing the geopolitical risks associated with Gulf and Red Sea shipping routes, central to worldwide energy supplies.
Additionally, the Organization of the Petroleum Exporting Countries and its allies, led by Russia, collectively known as OPEC+, left their output policy unchanged. The group will determine in March whether to sustain the self-imposed oil production cutbacks currently in effect for the first quarter.
The oil price decrease was also instigated by a shutdown at BP's Whiting, Indiana oil refinery following a power outage on Thursday, as explained by Bob Yawger of Mizuho bank.
Although power had been restored at the refinery by Friday, BP did not clarify how this affected oil processing. "Excess barrels with nowhere to go may be forced into storage," Yawger cautioned.
