Oil Prices Rise Amid Easing U.S. Labor Concerns

Oil prices increased on Thursday, driven by better-than-expected U.S. labor data that alleviated worries about a recession in the world’s largest economy.

At 14:30 ET (18:30 GMT), Brent oil futures climbed 1% to $79.08 a barrel, while West Texas Intermediate crude futures rose by 1.2% to $76.09 a barrel.

Data released Thursday revealed that applications for unemployment benefits fell to 233,000 for the week ending Aug. 3, which was lower than the anticipated 241,000 and a decrease from the revised 250,000 the previous week, marking an 11-month high. Despite these gains, both contracts had experienced significant losses in recent sessions amidst fears that a U.S. recession could reduce oil demand.

JPMorgan raised the likelihood of a U.S. recession by the end of the year to 35%, up from 25%, due to easing pressures in the labor market.

China Oil Imports Drop in July Amid Growth Concerns

The crude market faced initial weakness after data indicated that China imported around 10 million barrels of oil in July, marking a 12% decline from June and a 3% decrease compared to the same period last year.

This reduction in imports was attributed to lower fuel demand and declining refining margins, further compounded by a series of disappointing economic reports from China, raising concerns over slowing growth in the world’s largest oil consumer.

US Inventories Shrink More Than Expected, But Products Grow

U.S. oil inventories fell by 3.7 million barrels in the week ending August 2, marking the sixth consecutive month of decline and exceeding the projected drawdown of 1.6 million barrels. This data spurred optimism for tighter U.S. markets as demand increased over the previous two months during the travel-heavy summer season.

However, increases in gasoline and distillate inventories suggested a potential cooling of fuel demand following a strong summer. The Energy Information Administration reported that U.S. oil production reached a record high of 13.4 million barrels per day last week, and also forecasted that global oil demand would grow at a slower rate than previously anticipated.

Citi Maintains Longer Term Bearish View

Analysts at Citi Research released a note on Wednesday indicating a potential short-term rebound for the Brent contract to the low-to-mid-$80s per barrel. However, the firm maintains a bearish long-term outlook, predicting an average price of $60/bbl for Brent by 2025.

Factors supporting this outlook include a global economic slowdown, increased electric vehicle adoption in China potentially dampening oil demand, OPEC+ countries having significant spare capacity that can mitigate supply disruptions, and strong production from non-OPEC countries expected to further pressure prices.

*(Peter Nurse, Ambar Warrick contributed to this article.)