On Friday, oil prices closed higher, recovering some of the losses from this week’s weak U.S. job growth data. However, they closed the week at their lowest level since February due to worries about a possible recession.
Brent crude oil settled at $94.92 per barrel for 80 cents, an increase of 11% from last Friday’s settlement. U.S. West Texas Intermediate crude oil settled at $89.01 for 47 cents, a decrease of 8% over last Friday’s settlement.
The unexpected acceleration in U.S. job growth in July was due to nonfarm payrolls increasing by 528,000 jobs, which is the largest gain since February according to the U.S. Labor Department.
Bob Yawger (director of Mizuho’s energy futures), stated that “this is strong economic data which supports the oil market rise right now.”
This week, oil traders worried about inflation, economic growth, and demand. However, signs of tight supply have kept prices below a certain level.
Baker Hughes reported that the number of oil rigs, a sign of future output, dropped seven to 598. This is the first weekly drop in 10 weeks.
Since the Bank of England warned on Thursday of a prolonged downturn following its most recent interest rate hike since 1995, recession fears have increased.
Craig Erlam from Oanda London, a senior market analyst, stated that everyone is now taking the threat of recession more seriously. “Clearly, everybody is taking it far more seriously because we still see a tight market and producers without any capacity to change that.”
The market structure called backwardation was still in place, and supplies were still tight.
The OPEC+ producer group reached an agreement this week to increase its oil production goal by 100,000 barrels per daily (bpd), in September. However, this was one of the smallest increases since 1982 when such quotas were first introduced, according to OPEC data.
As sanctions imposed by the European Union on December 5th, prohibit seaborne imports from Russia of crude oil and other products, supply concerns are expected to escalate closer to winter.
Michael Tran, the RBC analyst, said that “with the EU stopping seaborne Russian imports it is a key question whether Middle Eastern producers would reroute their barrels towards Europe to fill the void.”
“How the Russian oil sanctions policy plays out will be one the most important matters to monitor for the rest of the year.”