By Nicole Jao
NEW YORK (Reuters) -Oil prices fell on Friday, posting their biggest weekly loss in three months, as investors factored in weak U.S. employment data and the possible timing of a Federal Reserve interest rate cut.
July futures were down 71 cents, or 0.85%, at $82.96 a barrel. U.S. West Texas Intermediate crude fell 84 cents, or 1.06%, to $78.11 a barrel in June.
Investors were concerned that higher borrowing costs would slow economic growth for an extended period in the US, the world’s biggest oil consumer, after the Federal Reserve decided this week to keep interest rates steady.
Brent fell more than 7% this week, while WTI fell 6.8%.
U.S. job growth slowed more than expected in April and annual wage growth cooled, data showed on Friday. This prompted traders to bet that the US central bank will make its first interest rate cut in September this year.
“The economy is slowing down a bit,” said Tim Snyder, economist at Matador Economics. “But (the data) indicates a path forward for the Fed to make at least one rate cut this year,” he said.
The Fed held rates steady this week and signaled high inflation rates that could delay rate cuts. Higher rates tend to weigh on the economy and can reduce demand for oil.
The market is revaluing the expected timing of possible rate cuts after the release of softer-than-expected monthly jobs data, said Giovanni Staunovo, an analyst at UBS.
U.S. energy companies this week cut the number of oil and drilling rigs in operation for the second week in a row to the lowest level since January 2022, Baker Hughes said Friday in its closely watched report.
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The number of oil and gas rigs, an early indicator of future production, fell by eight to 605 in the week to May 3, the biggest weekly fall since September 2023. The number of drilling rigs fell by seven to 499 this week, in the biggest weekly decline since November 2023. [RIG/U]
The geopolitical risk premiums from the war between Israel and Hamas have faded as the two sides consider a temporary ceasefire and hold talks with international mediators.
Further afield, the next meeting of OPEC+ oil producers – members of the Organization of the Petroleum Exporting Countries and allies including Russia – is scheduled for June 1.
Three OPEC+ group sources said it could extend voluntary oil production cuts beyond June if oil demand does not increase.
Money managers cut their net long futures and options positions in the week to April 30, the US Commodity Futures Trading Commission (CFTC) said.
