Oil prices steadied on Friday following softer-than-expected US jobs data but remained on track for their largest weekly drop in three months, weighed down by concerns over demand and higher interest rates.
Brent crude futures for July edged up by 17 cents, or 0.2%, to $83.84 a barrel at 1315 GMT. Meanwhile, U.S. West Texas Intermediate crude for June gained 6 cents, or 0.1%, to $79.01 per barrel.
Both benchmarks are facing weekly losses as investors worry that prolonged high interest rates could hinder economic growth in the United States, the world’s top oil consumer, as well as in other global regions.
Brent crude is set for a weekly decline of approximately 6%, while WTI is looking at a loss of 5.4% for the week.
JP Morgan analysts stated, “We view the commodities sell-off over the last two days as collateral damage from the Fed repricing and non-fundamental in nature.”
US job growth slowed more than anticipated in April, with annual wage gains cooling, according to recent data. This prompted traders to increase bets that the U.S. Federal Reserve would enact its first interest rate cut this year in September.
The Fed, which kept rates unchanged this week, highlighted high inflation readings that could delay rate cuts. Higher rates typically suppress economic activity and can dampen oil demand.
Additionally, Baker Hughes (BKR.O) is expected to release its weekly count of oil and gas rigs on Friday, serving as an indicator of future crude output from the world’s top producer.
Geopolitical tensions stemming from the Israel-Hamas conflict have also eased as the two sides consider a temporary ceasefire and engage in talks with international mediators.
Barbara Lambrecht, an analyst at Commerzbank, noted, “Hopes of a ceasefire and a sharp rise in U.S. crude oil inventories have caused the price of a barrel of Brent crude to slip below $85.”
Looking ahead, the next meeting of OPEC+ oil producers, including members of the Organization of the Petroleum Exporting Countries and allies like Russia, is scheduled for June 1.
Three sources within the OPEC+ group suggested that the alliance could extend its voluntary oil output cuts beyond June if oil demand fails to pick up.
JP Morgan, which anticipates an extension of cuts beyond June, remarked, “The stock builds in April will turn into draws in May through August and can push prices into the $90s in September.”
The stability in oil prices following the release of weak US jobs data underscores the intricate relationship between economic indicators and the energy market.
