By Georgina McCartney
HOUSTON (Reuters) -Oil prices fell $1 a barrel on Wednesday after the U.S. government sharply revised downwards a set of closely watched employment statistics.
futures fell $1.15, or 1.49%, to $76.05 a barrel. U.S. West Texas Intermediate crude futures closed down $1.24, or 1.69%, at $71.93.
U.S. employers created far fewer jobs over the year through March than originally reported, the Labor Department said Wednesday.
“The market is now moving from pricing in a stronger economy to a potential hard landing, which is why oil prices are hesitant to move higher,” said Phil Flynn, an analyst at Price Futures Group.
The department’s estimate for total payroll employment for the period April 2023 to March 2024 was reduced by 818,000.
“The sting in the scorpion’s tail that hurts more than anything is that this data has helped create a crisis of confidence,” said Tim Snyder, chief economist at Matador Economics.
The revised jobs data offset support from a decline in US oil inventories, and recently released Federal Reserve minutes indicating a likely rate cut in September.
Inventories, gasoline and distillate inventories fell in the week ended Aug. 16, the Energy Information Administration (EIA) said Wednesday.
Crude oil inventories fell by 4.6 million barrels this week to 426 million barrels, the EIA said. This exceeded analyst expectations in a Reuters poll for a decline of 2.7 million barrels.
Fed officials leaned heavily toward a rate cut at their September policy meeting last month, and minutes from the July 30-31 meeting indicate several Fed officials were reportedly willing to cut borrowing costs immediately.
Higher interest rates increase borrowing costs, which can slow economic activity and dampen oil demand.
Meanwhile, investors continued to worry about the prospect of economic weakness in China weighing on crude oil demand in the country.
China’s economic problems have contributed to weak processing margins and low fuel demand, hampering the operations of state-owned and independent refiners.
“We are currently measuring everything against the Chinese economy and if anything negative comes out of China, it will put pressure on energy,” said Snyder of Matador Economics.
GEOPOLITICAL RISK
Elsewhere, a Greek-flagged oil tanker was adrift in the Red Sea on Wednesday after repeated attacks sparked a fire on the vessel and caused it to lose power, Britain’s maritime agency said.
Iran-linked Houthi militants have carried out a series of attacks on international shipping near Yemen since November last year in solidarity with Palestinians in the war between Israel and Hamas.
The Red Sea leading to the Suez Canal is a major oil shipping route, and continued attacks pose a potential threat to global oil flows.
Meanwhile, US President Joe Biden planned to talk by phone with Israeli Prime Minister Benjamin Netanyahu on Wednesday about ways to keep a possible ceasefire and hostage deal alive in Gaza, a US official said.
The call follows US Secretary of State Antony Blinken’s whirlwind trip to the Middle East, which ended on Tuesday without an agreement between Israel and Hamas militants on a ceasefire in the Palestinian enclave.
