Paul Nurse
Investment.com — The world’s greatest consumer of crude oil, the United States, may experience slower growth as a result of the Federal Reserve’s aggressive monetary tightening after a huge July jobs report heightened expectations.
U.S. oil futures were trading 1.5% lower at $87.25 a barrel by 9:25 AM ET (1325 GMT), while the Brent price was down.21% at $93.02.
At $2.7729 per gallon, U.S. Gasoline RBOB Futures were down 0.7%.
Unexpectedly, the pace of job growth in the United States picked up in July, with nonfarm payrolls increasing by 528,000 over the previous month’s revised rate of 398,000.
Analysts had anticipated a decline in the reading to 250,000 as the world’s largest economy’s labor demand was expected to be negatively impacted by rising interest rates and increasing price inflation.
For central bankers, strong employment trends are reassuring, and the Federal Reserve is keeping a careful eye on them as it approaches its next meeting in September.
Given that the most recent GDP figures indicated that the U.S. economy was entering a technical recession, analysts have been weighing the likelihood that the Fed will begin to ease off the aggressive 0.75-point hikes it made in June and July. However, this release suggests that the U.S. central bank will continue its path of severe tightening.
The U.S. dollar has increased significantly in response to the sharp increase in payrolls, with the U.S. dollar index rising more than 1% to 106.670.
This has an impact on the oil market as well because a strong dollar increases the cost of the commodity for clients abroad.
Before the jobs report, the oil market already appeared fragile; crude prices dropped overnight to a new seven-month low as the Bank of England’s prediction of a protracted U.K. recession sparked a broader risk-off phase in global markets, specifically leading to the apparent capitulation of many oil bulls.
When they are released later in the session, CFTC data from Tuesday may provide insight into how positioning was prior to that selloff.
Even though the oil market may have given up all of its gains following Russia’s invasion of Ukraine, it’s crucial to remember that the world’s supply of oil is still extremely limited.
Only 100,000 barrels per day could be added by the Organization of Petroleum Exporting Countries and Allies (OPEC ) at their meeting on September 3rd, and there are still questions about how many of the group’s pledges would be kept.
Additionally, while discussions on resurrecting the Iran nuclear agreement are scheduled to restart, actual progress is still exceedingly difficult to agree upon. If sanctions are lifted against the Islamic Republic, this would allow it to resume exporting oil onto the world market.
