HOUSTON, Aug 21 (Reuters) – Oil prices fell by $1 per barrel on Wednesday following a significant downward revision of U.S. employment data, which has impacted investor confidence.
Brent crude futures closed at $76.05 per barrel, down $1.15 or 1.49%. U.S. West Texas Intermediate (WTI) crude futures ended at $71.93 per barrel, declining $1.24 or 1.69%.
The U.S. Labor Department reported that job additions for the year ending in March were much lower than initially estimated. The revised figures showed 818,000 fewer jobs than previously reported. This revision has shifted market expectations from a strong economy to concerns about a potential economic downturn. “The market is now worried about a hard landing, which is why oil prices are struggling to rise,” said Phil Flynn, analyst at Price Futures Group.
The revised employment data overshadowed some supportive factors, including a drop in U.S. oil inventories and recent minutes from the Federal Reserve suggesting a possible rate cut in September.
The Energy Information Administration (EIA) reported a decline in U.S. crude, gasoline, and distillate inventories for the week ending August 16. Crude oil stocks fell by 4.6 million barrels to 426 million barrels, surpassing the expected decrease of 2.7 million barrels, according to a Reuters poll.
The Fed’s July 30-31 meeting minutes revealed that officials were leaning towards an interest rate cut in September, with some willing to reduce borrowing costs immediately. Higher interest rates can slow economic activity and reduce oil demand.
Concerns about economic weakness in China also weighed on oil prices. China’s economic struggles have led to lower processing margins and reduced fuel demand, affecting refinery operations. “Any negative news from China will impact energy markets,” noted Tim Snyder, chief economist at Matador Economics.
In geopolitical news, a Greek-flagged oil tanker was reported adrift in the Red Sea after suffering repeated attacks that started a fire and caused the ship to lose power, according to the UK maritime agency. These attacks, attributed to Iran-aligned Houthi militants, threaten a key oil shipping route leading to the Suez Canal.
Additionally, U.S. President Joe Biden is scheduled to speak with Israeli Prime Minister Benjamin Netanyahu to discuss efforts to sustain a potential ceasefire and hostage negotiations. This follows Secretary of State Antony Blinken’s recent trip to the Middle East, which ended without a truce agreement between Israel and Hamas militants.