Investing.com — Oil prices fell on Wednesday as worries about the U.S. economy following a sharp downgrade in job numbers led to new demand worries that overshadowed a bigger-than-expected drop in domestic crude inventories.
At 1:39 PM ET (17:39 GMT), the stock was down 1.5% at $76.02 per barrel, while the stock was down 1.8% at $71.81 per barrel.
US job growth has been revised downward through March
The Bureau of Labor Statistics revised down March 2024 employment growth by 818,000 jobs earlier in the session, as part of the bureau’s annual benchmark review of payroll data.
While that was below estimates for up to 1 million fewer jobs, the review brought the average number of jobs created in the 12 months to March back to 174,000, from a previous pace of 242,000.
The data renewed investor concerns about the slowing economy and crude oil demand, although those were somewhat tempered by expectations that the Federal Reserve would make its first interest rate cut next month.
American supplies have become low
Data from the report showed that US inventories fell by 4.7 million barrels in the week to August 16, beating expectations for a decline of just 2 million barrels.
Inventories of crude products, including gasoline and distillates, unexpectedly fell by 1.6 million and 3.3 million, clouding expectations for production of 0.1 million and 0.04 million, respectively.
The supply of products comes as refineries have picked up the pace of activity, with capacity rising to 92.3% from 91.5% the week before.
The positive raw numbers helped allay some concerns about weakening domestic demand as peak summer demand comes to an end.
Israel agrees to a provisional ceasefire agreement
Media reports earlier this week indicated that Israel had agreed to a preliminary ceasefire deal brokered by the US, although the details of the agreement were still subject to negotiation.
But Hamas was said to be critical of the new deal, saying it reflected an American bias against Israel. Hamas also issued a statement criticizing US President Joe Biden.
Hamas’ comments came as Israel continued its offensive against Gaza, further complicating the prospect of a ceasefire.
The war between Israel and Hamas has been a major point of contention for oil markets, amid ongoing concerns that a spillover from the conflict could disrupt oil supplies in the Middle East.
US Secretary of State Antony Blinken was seen earlier this week shuttling between Egypt, Qatar and Israel to broker a ceasefire. But so far no deal appears to have been reached.
OPEC+ in “difficult situation” – ING
Crude oil prices have suffered steep losses in recent sessions on lingering concerns about slowing demand in top importer China.
Since peaking above $82 on Monday last week, it had lost 6.2% of its value by the end of trading on Tuesday, while the Nymex contract is down 7.5% over the same period.
“While weaker Chinese demand has been well reported, margins at refineries around the world are under pressure for much of August, suggesting these demand concerns are not just limited to China,” said analysts at ING in a note.
“The weakness in the oil market puts OPEC+ in a difficult situation,” ING added.
“They currently plan to gradually reduce supply restrictions from October onwards. However, the negative sentiment on the market may make the group reconsider whether to stick to this plan. Unfortunately for OPEC+, the global oil balance will be looser next year. This suggests that plans to ease cuts through 2025 may also need to be revised.
(Peter Nurse, Ambar Warrick contributed to this article.)
