WTI declines following disappointing US data

WTI crude dropped to $80.70, a decrease of more than 2%. Soft labour market data was released by the US. Middle East tensions are reducing, which will help the price drop.

The US economy, which consumes the most oil, is the primary cause of the steep losses in US crude oil at the end of the week, which have been caused by the release of weak labour and economic activity data.

Furthermore, as the tensions in the Middle East decrease, markets are optimistic that there won’t be any disruptions to supply or demand that will further exacerbate the downward trends.

The US Bureau of Labour Statistics released dismal data, indicating that job growth in the US economy in October was less than anticipated at 150,000 compared to 180,000 and had slowed from its previously revised figure of 297,000.

While average hourly earnings increased by 0.2% MoM—a smaller increase than anticipated—and increased by 4.1% YoY, the unemployment rate increased to 3.9%, above the projected 3.8%.

Accordingly, oil prices may experience further declines if the US keeps demonstrating that its economy is contracting and that the cumulative effects of its monetary policy are only now becoming apparent. This is because the world’s biggest consumer would need to use less energy.

Positively, since higher rates are typically negatively correlated with energy demand, the WTI price would benefit as the Fed nears the end of its tightening cycle. In this way, the market turns its attention to the upcoming reports—two more inflation readings and a job report—ahead of the next Fed meeting in December.