Oil Prices Drop Amid Economic Concerns

Investing.com– Oil prices settled sharply lower Friday, marking a fourth consecutive week of losses as weak U.S. jobs data heightened worries that slowing economic growth would impact consumption as the year progresses.

At 14:30 ET (18:30 GMT), West Texas Intermediate crude futures fell 2.8% to $73.52, while Brent oil futures dropped 3.2% to $77.01 a barrel.

Oil Heads Towards Fourth Weekly Loss as Growth Concerns Mount

The release of nonfarm payrolls on Friday reported that the economy added 114,000 new jobs last month, the lowest level since January 2021, down from a revised 179,000 in June. Additionally, the unemployment rate rose to 4.3%, surpassing the expected 4.1%.

This data intensified fears of a global economic slowdown that could undermine oil demand, especially given recent worries about prolonged deceleration in China.

There are also concerns about increasing non-OPEC supply, with U.S. crude output projected to rise by 500,000 barrels per day this year—a reduction from the 1 million barrels per day seen in the previous year but still accounting for 60% of non-OPEC production growth, according to Goldman Sachs.

U.S. oil rig counts remained stable at 482, as reported by Baker Hughes on Friday.

Middle East Tensions Take a Back Seat

Earlier this week, concerns regarding potential warfare in the Middle East influenced crude prices. However, these concerns were overshadowed by worries about slowing global growth.

Nonetheless, tensions in the Middle East are expected to persist following Iran’s threat to retaliate against Israel for the alleged assassination of Hamas leader Ismail Haniyeh in Iran. Israel, in turn, announced the killing of Hezbollah commander Fouad Shukur in an airstrike, which sparked outrage from the Iran-backed group.

The prospect of a widespread conflict in the Middle East led traders to add a risk premium to oil prices due to the potential for supply disruptions.

Analysts at ING noted that the market is currently attempting to balance these supply risks against the negative sentiment stemming from demand concerns. They pointed out that weakened Chinese demand has been on the radar, and disappointing macro data from the U.S. will likely exacerbate these apprehensions.

(Peter Nurse, Ambar Warrick contributed to this report.)