The price of a barrel of oil fell globally by more than 3% at the end of trading today, Friday, February 3 (2023), after strong job data in the United States, to record weekly losses for the second time in a row.
US jobs data, which came in better than expected, raised concerns that the US Federal Reserve will continue to raise interest rates, which could negatively affect economic growth, and thus the demand for crude.
Investors are seeking more clarity on the impending European ban on Russian refined products and more indications of a recovery in demand in China.
While the weekly report issued by Baker Hughes showed that oil rigs in the United States decreased by 10 rigs during the past week, to record a total of 599 rigs.
The global price of a barrel of oil today
At the end of the session, the price of benchmark Brent crude futures – April 2023 delivery – fell by 2.8%, to reach $79.94 a barrel.
The price of US West Texas crude futures – delivery in March 2023 – fell by 3.3%, to $73.39 a barrel, according to data seen by the specialized energy platform.
Yesterday, Thursday, February 2, oil prices ended their trading in decline, with the rise of the US dollar.
Brent crude fell by 7.5% for the week ending today, and WTI fell by 7.9%.
American jobs
US job growth accelerated sharply in January amid continued labor market resilience, but more moderation in wage gains should give the Federal Reserve some relief in its fight against inflation.
The US economy added 517,000 jobs last month, far ahead of analysts’ expectations of 190,000.
The US central bank on Wednesday eased into a moderate interest rate hike compared to last year, but policy makers also expected that “continued increases” in borrowing costs would be needed.
Market analyst at Philip Nova, Priyanka Sachdeva, said that interest rate increases in 2023 are likely to affect the economies of the United States and Europe, reinforcing fears of an economic slowdown that is likely to weaken global demand for crude oil.
Oil market conditions
Conflicting signals about a recovery in fuel demand in China, the world’s largest oil importer, kept the global price of oil down.
ANZ analysts noted a sharp jump in traffic in China’s 15 largest cities after the Lunar New Year holiday, but also noted that Chinese merchants were “relatively absent.”
The prospect of an economic recovery in China after easing Corona restrictions has boosted the oil market so far this year, along with the decline in the dollar, which makes the commodity cheaper for holders of other currencies.
The dollar fell after interest rates were slowed down by the US Federal Reserve, however, central banks of other major economies continue to increase interest rates even as inflation recedes.
While oil’s gains were supported by a weak dollar, its gains were limited by the prospect of slowing growth in the United States, the world’s largest oil consumer, and stagnation in places like Britain, Europe, Japan and Canada.
demand for oil
“The crude oil demand outlook needs a clear indication that China’s reopening will be smooth and that US economic growth momentum will not deteriorate quickly,” said OANDA analyst Edward Moya, according to Reuters.
Investors are also looking forward to developments related to the EU’s February 5 ban on Russian refined products, as EU countries seek an agreement on Friday to set a price cap for Russian oil products.
The Kremlin said on Friday that the European Union’s ban on Russian refined oil products will lead to more disruptions in global energy markets.
“The exact details about the cap and how it will be implemented are still unclear,” said Bill Weatherburn, a commodity economist at Capital Economics, adding that uncertainty was keeping prices in check.
“There has been no data from China indicating the extent to which demand for crude oil has recovered in China,” he added, according to Reuters.
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