Oil Prices
Oil futures experienced a notable increase of $1 in early trading on Monday, driven by the approaching threat of a potential hurricane system targeting the U.S. Gulf Coast, as well as a recovery from a previous selloff.
This recent rise in oil prices follows a period of decline triggered by disappointing U.S. jobs data released on Friday.
As of 0146 GMT, West Texas Intermediate (WTI) crude futures had risen by $1, marking a 1.48% increase to reach $68.67 per barrel. Meanwhile, Brent crude futures saw a gain of 99 cents, or 1.39%, bringing the price to $72.05 per barrel.
The uptick in oil prices is partially attributed to concerns over a potential hurricane in the U.S. Gulf Coast. According to the U.S. National Hurricane Center, a weather system currently situated in the southwestern Gulf of Mexico is expected to develop into a hurricane before making landfall on the northwestern U.S. Gulf Coast.
This region is crucial for the U.S. oil industry, accounting for approximately 60% of the nation’s refining capacity.
Market sentiment has improved following last week’s significant selloff. Independent market analyst Tina Teng noted that there was a degree of recovery from the downturn observed last week.
On Friday, Brent crude had fallen 10% over the week, reaching its lowest level since December 2021. WTI crude had dropped 8% to its lowest close since June 2023.
The sharp decline in crude oil prices was attributed to a weakening economic outlook. Weak U.S. jobs data released on Friday heightened concerns about a potential decrease in oil demand from the world’s largest consumer.
The U.S. government’s jobs report revealed that nonfarm payrolls had increased by just 142,000 in August, falling short of market expectations.
Furthermore, the July job figures were revised downward to show an increase of only 89,000, marking the smallest gain since December 2020, when job figures had shown an outright decline.
This disappointing jobs report has influenced market expectations regarding U.S. monetary policy. Analysts anticipate that the Federal Reserve may opt for a more modest interest rate cut of 25 basis points this month, rather than a more substantial half-point reduction.
Lower interest rates generally support higher oil demand by fostering economic growth and making oil cheaper for buyers holding non-dollar currencies.
Despite the rebound in oil prices, weak demand continues to restrict significant price gains. In Asia, refining margins have fallen to their lowest seasonal levels since 2020 due to subdued demand from the two largest economies.
Additionally, fuel oil exports to the U.S. Gulf Coast declined to the lowest level since January 2019 last month, reflecting weaker refining margins and a general reduction in global oil demand.
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