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Oil falls about 3% as strong U.S. jobs data prompt interest rate concerns

Published 02/02/2023, 08:34 PM
Updated 02/03/2023, 04:10 PM
© Reuters. FILE PHOTO: The Imperial Strathcona Refinery which produces petrochemicals is seen near Edmonton, Alberta, Canada, October 7, 2021.  REUTERS/Todd Korol/File Photo

By Stephanie Kelly

NEW YORK (Reuters) -Oil prices fell to over three-week lows on Friday in a volatile session, after strong U.S. jobs data raised concerns about higher interest rates and as investors sought more clarity on the imminent EU embargo on Russian refined products.

Brent crude futures fell $2.23, or 2.7%, to $79.94 a barrel, after rising to a session high of $84.20. It hit a session low of $79.72, its lowest since Jan. 11.

U.S. West Texas Intermediate crude (WTI) ended down $2.49, or 3.3%, at $73.39, after trading between $78.00 and $73.13, its lowest since Jan. 5.

Brent registered a 7.8% decline this week while WTI dropped 7.9%.

U.S. job growth accelerated sharply in January amid a persistently resilient labour market, but a further moderation in wage gains should give the Federal Reserve some comfort in its fight against inflation.

"The market can't decide whether it should be nervous about a recession or more worried about the Federal Reserve being aggressive with interest rates," said Phil Flynn, analyst at Price Futures Group.

The U.S. central bank on Wednesday scaled back to a milder rate increase than those over the past year, but policymakers also projected that "ongoing increases" in borrowing costs would be needed.

Increases in interest rates in 2023 are likely to weigh on the U.S. and European economies, boosting fears of an economic slowdown that is highly likely to dent global crude oil demand, said Priyanka Sachdeva, market analyst at Phillip Nova.

European Union countries agreed to set price caps on Russian refined oil products to limit Moscow's funds for its invasion of Ukraine, the Swedish presidency of the EU said on Friday.

EU diplomats said the price caps are $100 per barrel on products that trade at a premium to crude, principally diesel, and $45 per barrel for products that trade at a discount, such as fuel oil and naphtha.

The Kremlin said the EU embargo on Russia's refined oil products would lead to further imbalance in global energy markets.

Meanwhile, ANZ analysts noted a sharp jump in traffic in China's 15 largest cities after the Lunar New Year holiday but said that Chinese traders had been "relatively absent."

© Reuters. FILE PHOTO: The Imperial Strathcona Refinery which produces petrochemicals is seen near Edmonton, Alberta, Canada, October 7, 2021.  REUTERS/Todd Korol/File Photo

In U.S. supply, energy firms this week cut the number of oil and natural gas rigs by the most since June 2020, energy services firm Baker Hughes Co said. U.S. oil rigs fell 10 to 599 this week, their lowest since September, while gas rigs dropped by two to 158.

The U.S. Commodity Futures Trading Commission said on Thursday that as a result of the ransomware attack on ION Trading UK, the CFTC's weekly Commitments of Traders report will be delayed until all trades can be reported. CFTC reports provide a snapshot of investor positioning on various assets, including oil.

Latest comments

how brave of the EU, to set a cap $20 higher than its current price 🤣. what happened to banning Russian oil?
Bloomberg reports 20% of oil tankers globally are evading Russia sanctions. Biden and allied foreign policy is a failure, and Ukraine war goes on at US taxpayer's expense, while.US southern border is not enforced.
100 accurate Hopefully our nation can withstand 2 more years under this regime
oil fell 3% because of the EU approving a 100$ cap on Russian Gasoil prices. Get your facts right !
The triggered retrumplicans whining about Biden and refilling the SPR were wrong.   Again.
only look first, you posted and have retrumplicans in it (as always). keep looking pathetic
has Biden refilled the strategic reserve?
looks like they read my comment and revised they misinformation, lol
why do they keep talking about how strong the dollar is. It drops week after week. Last we oil was 82 and the dollar 103, now dollar is 102. by that metric oil should be up. these writers make up garbage constantly...
Dollar index is >10% high than it was in mid-2021.
true, but on a continuosly down week friday always panic sells
  This article doesn't even mention the US dollar.
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