WTI declines as the US dollar strengthens on US labour data

 WTI crude declines by more than 1% as the dollar-denominated commodities are hurt by a stronger US dollar and concern about Fed tightening. Mixed labour market indicators from the US and increased business activity heighten the likelihood of a rate hike in June.

Fears of a recession brought on by restrictions on corporate activity in China and Europe pose a danger to lower oil demand. Crude prices fall more than 1% as the currency strengthens due to expectations that the US Federal Reserve (Fed) would tighten monetary policy further. This is bad news for assets denominated in dollars. WTI reached a day high of $72.30 prior to the time of writing and is currently trading at $70.94.

Data from the US released on Thursday sent conflicting messages about the labour situation. US unemployment claims increased more than expected, while the JOLTs report showed a decline in job openings, signalling a softening of the labour market. Although the ADP National Employment Report for June exceeded expectations, the Fed might decide against halting for a second consecutive meeting.

A gauge of company activity in the US services sector improved in the interim. As a result, traders continue to expect a 25 basis point rate hike in June; probabilities are still around 90%. The latest Fed minutes showed that policymakers agreed to pause the ongoing tightening cycle, despite most officials wanting to raise rates in June.

Global measures of business activity in China and Europe sparked recessionary fears, which could dent oil demand. The US Energy Information Administration (EIA) revealed that US crude stockpiles fell more than estimates last week. Inventories dropped by 1.5 million barrels in the last week, above forecasts of 1 million.

OPEC ministers and oil company executives told a two-day Vienna conference that governments needed to turn their attention from supply to demand.