Oil Plummets After Data Shows Remarkable Resilience Of U.S. Economy

The good news means massive Fed hikes, traders worry: File Image/Pixabay

Friday's news demonstrated that once again, there's no pleasing oil traders: crude prices fell yet again, this time by about 3 percent anddespite strong jobs data, which they regarded as justification for more worries about banks raising interest rates and ruining what appears to be solid demand despite numerous headwinds.

After it was disclosed that U.S. job growth accelerated sharply in January while the unemployment rate hit more than a 53.5 year low of 3.4 percent, gloomy traders caused West Texas Intermediate to settle down $2.49, or 3.3 percent, at $73.39.

Brent fell $2.23, or 2.7 percent, to $79.94 per barrel; for the week, Brent suffered a 7.8 percent decline while WTI dropped 7.9 percent.

The irony is that the jobs figures suggest the economy is nowhere near a recession – a fear that has caused oil to be in a bearish mode for weeks now; also, the U.S. Labour Department revealed data showing a sharp rebound in services, plus average hourly earnings increased faster in 2022 than previously estimated.

However, Daniel Vernazza, chief international economist at UniCredit Bank, pointed out that the labour market is "still running hot, too hot for the Fed's liking: anyone who thought the Fed might stop hiking as soon as its March meeting is likely to be disappointed on this evidence."

Phil Flynn, senior market analyst at Price Futures Group Inc., said of crude, "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."

Another bullish disclosure on Friday regarding demand that failed  to sway traders: ANZ analysts noted a sharp jump in traffic in China's 15 largest cities after the Lunar New Year holiday, a good start to the much hoped-for return to normality in that country following the abandonment of its zero-tolerance Covid policy.

Meanwhile, European Union countries on Friday set price caps on Russian refined oil products at a rate of $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.

Moscow responded by stating the caps would lead to further global supply and demand imbalances.