Oil Prices Slip as Weak U.S. Jobs Data Clouds Demand Outlook

Oil prices edged lower on Wednesday, giving back part of their recent rally as unexpectedly weak U.S. labor market data raised fresh concerns over the health of the world’s largest oil-consuming economy.

By 08:45 ET (12:45 GMT):

• Brent crude fell 0.7% to $65.17 per barrel
• West Texas Intermediate (WTI) dropped 0.8% to $62.93 per barrel

U.S. Labor Market Disappoints

The decline in crude prices was driven largely by the ADP employment report, which revealed that U.S. private payrolls grew by just 37,000 in May—far below expectations. April’s figure was also revised lower to 60,000.

This underwhelming data preceded the more comprehensive nonfarm payrolls report due Friday, adding to worries that tariffs and trade instability are starting to weigh heavily on business confidence and hiring.

Additionally, U.S. government data showed a tight labor market, with 1.03 job openings per unemployed person in April, essentially flat compared to March. The labor softness suggests diminished energy demand from industries and consumers alike.

Geopolitical Risk and Supply Concerns Provide Some Support

Despite the labor data, oil remains underpinned by geopolitical and supply-side risks:

• OPEC+’s steady production increase of 411,000 bpd for July calmed oversupply fears, reinforcing expectations of gradual, controlled output increases.
• In Eastern Europe, Ukraine’s recent deadly strikes on Russian targets cast doubt over any near-term ceasefire, keeping risk premiums high.
• The U.S. is reportedly preparing new energy sanctions targeting India and China’s Russian oil imports, potentially curbing global Russian supply.
• In the Middle East, nuclear talks between the U.S. and Iran appear to be unraveling. Iran’s Supreme Leader outright rejected halting uranium enrichment—a key U.S. condition—dimming hopes of any easing in sanctions on Iranian oil.
• Canadian wildfires in Alberta are threatening oil production in North America, although current assessments suggest limited disruption.

U.S. Inventory Draw Adds to Volatility

Adding to the mixed signals, the American Petroleum Institute (API) reported that U.S. crude inventories fell by 3.3 million barrels last week, well above expectations of a 0.9 million-barrel draw.

This marks the second straight week of declining stockpiles, signaling robust demand ahead of the summer driving season—a traditionally high-consumption period in the U.S.

The official Energy Information Administration (EIA) report, due later today, will be closely watched for confirmation.

Outlook

Oil markets are navigating a complex tug-of-war between geopolitical risks and signs of economic slowdown. While geopolitical flashpoints and tightening inventories provide upside potential, slowing job growth and persistent trade tensions raise flags about the strength of demand going forward.

All eyes will now turn to Friday’s U.S. jobs report for stronger clues on whether the soft labor data marks the beginning of a broader economic slowdown—and whether that could dampen oil consumption over the crucial summer period.