Oil & Gas

02 Jun 2023

Oil Treads Water Ahead of OPEC Meeting, Nonfarm Payrolls

02 Jun 2023  by Oil prices moved little in Asian trade on Friday amid caution ahead of key labor data offering more signals on the Federal Reserve’s rate hikes, while uncertainty before an OPEC meeting also kept traders wary of big bets.

Crude prices rose sharply on Thursday amid optimism over raising the U.S. debt ceiling, positive Chinese economic data, and a pullback in the dollar. But prices were still set to close the week lower, as persistent concerns over a demand slowdown this year largely offset any positive cues.

Focus is now squarely on nonfarm payrolls data due later in the day, which is expected to provide more cues on how the Fed plans to treat interest rates during an upcoming meeting this month.

The data also comes after a string of weak manufacturing and labor market readings this week, which saw investors reverse their bets on more rate hikes in June. But given that nonfarm payrolls have beat consensus for 13 of the past 12 months, markets remained on edge.

Rising interest rates push up the dollar, which in turn pressures crude markets by weighing on international demand.

Brent oil futures steadied at $74.36 a barrel, while West Texas Intermediate crude futures were flat at $70.16 a barrel by 21:42 ET (01:42 GMT). Both contracts were set to end the week down 3.3%.

Uncertainty over the Organization of Petroleum Exporting Countries and allies (OPEC+) plans for future production cuts also kept oil markets cautious, ahead of a meeting between members of the cartel this Sunday. Saudi Arabian and Russian ministers offered mixed signals on future production cuts in recent weeks, after the cartel unexpectedly cut production in April.

But given that crude demand may sour further this year as global economic conditions deteriorate, the cartel may be pushed into trimming production again to support oil prices.

Government data from China showed earlier this week that the country’s manufacturing sector shrank further in May as a post-COVID economic rebound ran out of steam. While a private survey still pointed to some resilience in the sector, overall economic activity in the country appeared to be struggling.

This saw markets question expectations that a recovery in China will drive oil demand to record highs this year.

U.S. oil inventories also unexpectedly grew over the past week, pointing to a high level of supply and softening demand even as the travel-heavy summer season kicks off.


More News