Oil Prices Tumble Amid Weak U.S. Jobs Report
Oil prices are facing a steep decline, heading for their largest weekly drop in 11 months. This slump comes in the wake of a weak U.S. jobs report, which has heightened concerns about sluggish demand in the world’s largest crude consumer, hence impacting oil prices. West Texas Intermediate (WTI) crude fell about 2.4%, trading below $68 a barrel. This decline is on track to be the most significant weekly plunge since October 2023.
Oil Prices Tumble: Impact of the U.S. Jobs Report
The weak jobs data released on Friday has intensified speculation that the Federal Reserve might implement a significant interest rate cut. However, this speculation also underscores fears of weakening oil consumption. The latest figures have further pressured crude prices, which have been on a downward trajectory for several weeks.
“The market remains on edge, assessing the strength of the global economy and the potential actions of the Fed,” said Rebecca Babin, senior energy trader at CIBC Private Wealth. The current situation reflects ongoing uncertainty about both economic conditions and central bank policies.
OPEC+ Decisions and Market Reactions
Efforts by OPEC+ to stabilize prices have so far failed to halt the tumble in oil prices. This week, the coalition decided to abandon a plan to increase output by 180,000 barrels per day in October and November. Despite this, a longer-term plan to add 2.2 million barrels per day over the next year remains in effect, although the completion date has been extended to December 2025.
Brent futures have been trending lower since early July. Weakness in the economies of China and the U.S., the top two oil consumers, has exacerbated concerns about demand. Additionally, rising crude production in the U.S. has put additional pressure on global supply balances.
Oil Prices Tumble: Market Outlook and Expert Opinions
The delay in OPEC+ output adjustments and a significant drop in U.S. crude inventories—nearly 7 million barrels—have not been enough to reverse the downward trend in oil prices. Analysts will closely monitor next week’s monthly market outlook reports from OPEC, the Energy Information Administration (EIA), and the International Energy Agency (IEA).
Citigroup analysts, including Eric Lee, noted, “We expect price support at $70 to $72 for Brent crude due to the OPEC+ unwind delay, ongoing geopolitical issues, and financial positioning.” They also warned of a possible decline to the $60 range in 2025 as a significant market surplus emerges.
Saudi Arabia Cuts Pricing Amid Demand Concerns
In related news, Saudi Arabia has reduced the pricing of its flagship Arab Light crude grade for Asia. The official selling price was lowered by 70 cents to $1.30 a barrel against the regional benchmark. This reduction was smaller than the 85 cents a barrel decrease anticipated by traders and refiners.
Saudi Aramco’s price cut reflects growing concerns over declining demand. Oil prices plunged earlier this week, erasing all gains for the year. The OPEC+ decision to delay planned output increases by two months has not been sufficient to recover lost ground.
OPEC+ Output and Saudi Arabia’s Strategy
The delay in increasing oil output could see Saudi Arabia exporting less than 6 million barrels a day, consistent with its levels over the past three months. Concerns about sluggish oil use in China and weaker refining margins in Asia are contributing to a cautious approach.
Market watchers predict that stockpiles may build through the end of this year and into 2025. Citigroup analysts indicated that Brent prices could potentially dip below $70 a barrel if OPEC+ had proceeded with its planned production increases.
Additional Price Cuts by Aramco
Saudi Aramco has also reduced prices for its crude to Northwest Europe by about 80 cents a barrel across various grades and trimmed prices for North American oil by 10 cents a barrel. These adjustments reflect ongoing concerns about demand and refining margins.
In the U.S., demand for motor fuel has been disappointing this summer, and refining margins have dropped to their lowest levels since 2021. Despite U.S. crude inventories reaching their lowest point in a year, the market remains under pressure from weak demand signals.
Oil prices are set for their largest weekly drop in nearly a year, driven by weak U.S. economic data and persistent demand concerns. As OPEC+ navigates its output strategies and Saudi Arabia adjusts pricing, market participants will be keenly watching for signs of stabilization or further declines.
Technical View
According to technical analysts, crude oil is currently in a downward trend and appears to be in an excessively oversold category. However, commodities can remain in the oversold or overbought zone for extended periods unless a conclusive trend reversal occurs.
Additionally, crude oil has breached an important support level at $68.61, suggesting further bearish movements ahead. On the other hand, a rate cut in the U.S. and a potential dip in the value of the U.S. dollar could signal a bullish outlook for commodities.
Chart by Trading View
