Oil prices dipped on Thursday, extending a recent downward trend. Weak U.S. labor data fueled concerns about a potential economic slowdown in the country, overshadowing optimism surrounding potential interest rate cuts.
Uncertainty surrounding a ceasefire between Israel and Hamas offered little support for crude prices. Negotiations for a ceasefire appeared to be faltering, with no agreement in sight.
Despite a surprise drawdown in U.S. oil inventories, crude prices continued their decline. Brent oil futures fell 0.1 percent to $75.95 a barrel, while West Texas Intermediate crude futures dropped 0.2 percent to $71.16 a barrel by 21:04 ET (01:04 GMT).
The latest round of losses in oil followed a report from the U.S. Department of Labor revealing a significant downward revision in job growth. The Bureau of Labor Statistics revised March 2024’s employment gains downward by 818,000 positions as part of an annual review of payroll data.
This data sparked renewed concerns about a U.S. recession, particularly after weaker-than-expected labor data for July triggered a risk-off sentiment across global financial markets. While the softer labor market reading solidified expectations for an interest rate cut in September, it also raised concerns that the Federal Reserve might be acting too late and that the U.S. economy could be headed for a hard landing.
This scenario could negatively impact demand in the world’s largest fuel consumer, especially as recent data showed oil production in the U.S. reaching a record high of over 13 million barrels per day.
Read more: Oil prices slide on rising U.S. inventories, easing Middle East tensions
U.S. oil inventories fall sharply
However, U.S. demand appeared robust in the near term. Official data released on Wednesday showed oil inventories shrinking by 4.6 million barrels in the week ending August 16, exceeding expectations for a 2 million barrel drawdown.
Significant drawdowns in both distillates and gasoline stockpiles suggested that fuel demand remained strong, even as the peak summer travel season came to an end.
Despite the current strong demand, traders remain uncertain about the outlook for demand later in the year, especially amid growing recession fears. Potential production increases outside the U.S. also raised concerns about an oil supply glut.
Weak economic readings from China further fueled concerns about slowing demand in the world’s largest oil importer.
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