Gaza Hopes Overshadowed By Dismal U.S. Jobs Revision; Oil Extends Losses

One analyst believes the success of the ceasefire talks is slim: File Image/Pixabay

Oil incurred a third straight session of losses on Wednesday, as dismal jobs data from the U.S. fuelled
demand fears among the analytical community and eclipsed hopes for a Gaza ceasefire and its potential impact on the energy market – for the time being.

After it was learned that U.S. employers added far fewer jobs than originally reported in the year through March, West Texas Intermediate settled down $1.24 at $71.93 per barrel; Brent settled down $1.15 at $76.05 per barrel.

The U.S. Labor Department lowered its estimate for total payroll employment for the period from April 2023 to March 2024 by 818,000, meaning that monthly job gains during the period averaged roughly 174,000, compared to the previously reported figure of 242,000; if these figures hold through the department's final revision in February, it would be the largest downward revision since March 2009 when the downward revision totalled 902,000.

However, analysts regarded the revisions as something that would further pressure the U.S. Federal Reserve to lower interest rates in September: "This may be the wake-up call for [Fed chair Jerome] Powell and [policymakers] that they need to commit to cuts and forward guidance more explicitly," said Michael Block, co-founder and chief strategy officer at AgentSmyth.

Phil Flynn, senior market analyst at Price Futures Group Inc., said of Wednesday's oil trading, "The market is now going from pricing in a stronger economy to a potential hard landing, which is why oil prices are reluctant to move higher."

Overshadowed by the market digesting the disappointing jobs data was yet more evidence that despite headwinds, demand in the U.S. is as strong as ever: the Energy Information Administration on Wednesday reported that crude inventories fell by 4.6 million barrels to 426 million barrels in the week, exceeding expectations for a 2.7 million barrel draw.

Gasoline inventories fell by 1.6 million barrels over the week to August 16, which compared with a draw of 2.9 million barrels for the previous week, and middle distillates logged an inventory draw of 3.3 million barrels for the week.

Bloomberg observed that "Crude has now lost almost all of its year-to-date gains as concerns about consumption — in the U.S. as well as China — have offset the impact of supply cutbacks from OPEC [the Organization of the Petroleum Exporting Countries] and its allies."

Notably muted on Wednesday was discussion among oil analysts about potential success of the Gaza ceasefire talks, previously a strong source of optimism; instead, Vivek Dhar, analyst at Commonwealth Bank of Australia, told media that "We think any fall in oil prices tied to a Gaza truce will likely be short lived," adding that this was because the chances of a ceasefire being signed by Israel and Hamas were slim.