Key Points:
- Oil prices stabilize as investors analyze U.S. employment data for indications of potential interest rate cuts.
- U.S. job growth in February exceeds expectations, but rising unemployment and slowing wage growth suggest a possible economic slowdown.
- Lower interest rates are potential drivers of increased oil demand by supporting economic growth.
- Brent and WTI benchmarks are set for weekly losses, and a range-bound pattern has been observed over the past month.
Oil prices stabilized on Friday as investors evaluated the latest U.S. employment data, seeking insights into the possibility of interest rate cuts in the United States and Europe in the year’s first half. Brent crude futures experienced a marginal decline of 0.13%, or 11 cents, reaching $82.85 a barrel, while U.S. West Texas Intermediate crude futures were down 0.18%, or 14 cents, settling at $78.79.
According to the Bureau of Labor Statistics, U.S. job growth surpassed expectations, with 275,000 new nonfarm payrolls added in February, outperforming the projected 200,000 rise from a Reuters survey. However, the unemployment rate increased, and wage growth slowed, suggesting a potential slowdown in the U.S. economy. This led to speculation about a Federal Reserve interest rate cut in June.
UBS analyst Giovanni Staunovo noted that the data points towards “a less tight job market, supporting the soft landing narrative and increasing the odds of a June rate cut.” The oil market closely monitors signals regarding the timing of potential rate cuts in the United States and the European Union.
Lower interest rates could stimulate oil demand by fostering economic growth. European Central Bank (ECB) policymaker Francois Villeroy de Galhau indicated that the ECB might commence lowering interest rates between April and June. Meanwhile, U.S. Federal Reserve Chair Jerome Powell suggested Thursday that the central bank is nearing the confidence threshold to initiate interest rate cuts.
Despite the positive employment data, Brent and WTI benchmarks are on track for weekly losses, with Brent facing a 0.8% drop from the previous week and WTI down by 1.5%. Over the past month, both have maintained a narrow range, fluctuating between $81.50 and $84 for Brent and $76 to $80 for WTI.
Investec Head of Commodities Callum Macpherson remarked on the stability in oil markets, noting their relative flatness amid strong rallies and record highs in equities, gold, bitcoin, and bonds in recent weeks.
