Oil fell on Friday as a weak jobs report dimmed the outlook for energy demand in the US, while swelling supplies may grow further after OPEC and allied producers meet over the weekend.
Brent crude futures fell $1.88, or 2.81 per cent, to $65.11 a barrel by 11:08 a.m. CDT(1608 GMT). US West Texas Intermediate crude dropped $1.94, or 3.06 per cent, to $61.54.
On Wednesday, Reuters reported that the eight members of OPEC will consider raising production further at a meeting on Sunday. US crude inventories rose 2.4 million barrels last week, rather than falling as analysts expected.
“It’s kind of a perfect storm,” said Phil Flynn, senior analyst with Price Futures Group. “It started falling with the OPEC story. The jobs report was not helpful. That suggests the market is weakening.”
US nonfarm payrolls increased by only 22,000 jobs last month after rising by an upwardly revised 79,000 in July, the Labor Department’s Bureau of Labor Statistics said in its closely watched employment report on Friday. Economists polled by Reuters had forecast payrolls rising by 75,000 positions after a previously reported 73,000 gain in July.
The initial August job count has tended to exhibit a weak bias, with revisions subsequently showing strength. Estimates ranged from no jobs added to 144,000 positions created.
The weak jobs report will put pressure on the US Federal Reserve to cut interest rates, Flynn said.
Also, expectations are growing that OPEC+, the Organization of the Petroleum Exporting Countries and allies like Russia, will decide at Sunday’s meeting to push more barrels into the market to regain market share.
OPEC+, which pumps about half of the world’s oil, would be starting to unwind a second layer of output cuts of about 1.65 million barrels per day, or 1.6 per cent of world demand, more than a year ahead of schedule.
“If the eight OPEC+ countries were to agree on another production increase, we believe this would place significant downward pressure on oil prices. After all, there is already a significant risk of a supply surplus,” Commerzbank analysts said in a note.
Supply risks continue to support the market, however. US President Donald Trump told European leaders on Thursday that Europe must stop buying Russian oil, a White House official said.
Any cuts to Russia’s crude exports or other disruption to supplies could push global oil prices higher.
“There remains the risk that Western powers could ramp up sanctions against Russia in an attempt to compel President Putin to the negotiating table,” JP Morgan analysts said on Friday.
