Oil Prices Fall on Weak US Jobs Data, Swelling Supplies

Oil prices were down by about 2 per cent on Friday as a weak US jobs report dimmed the outlook for energy demand, while swelling supplies may grow further with the Organisation of the Petroleum Exporting Countries and its allies, OPEC+ mull another increase.

During the session, Brent crude futures traded at $65.50 a barrel after losing $1.49 or 2.22 per cent and the US West Texas Intermediate (WTI) crude futures finished at $61.87 per barrel after it lost $1.61 or 2.54 per cent.

Eight OPEC+ producers will consider raising production further at a meeting on Sunday.

OPEC+ has reversed its strategy of output cuts from April and has already raised quotas by about 2.5 million barrels per day, about 2.4 per cent of world demand, to boost market share and under pressure from U.S. President Donald Trump to lower oil prices.

At their last meeting in August, the eight members raised production by 547,000 barrels per day for September, completing the total increase in output for the year to 2.5 million barrel per day. This included a 300,000 barrels per day additional production allocation for the UAE.

Another output boost would mean OPEC+, which pumps about half of the world’s oil, would be starting to unwind a second layer of cuts of about 1.65 million barrels per day, or 1.6 per cent of world demand, more than a year ahead of schedule.

Market analyst’s noted that another production increase would place significant downward pressure on oil prices since there’s already a significant risk of a supply surplus.

For instance, US crude inventories rose 2.4 million barrels last week, rather than falling as analysts expected.

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.

The weak jobs report may put pressure on the US Federal Reserve to cut interest rates.

President Trump also told European leaders on Thursday that Europe must stop buying Russian oil.

Any cuts to Russia’s crude exports or other disruption to supplies could push global oil prices higher.