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HomeNewsDollar Soars On The U.S. Jobs Report, Driving Oil Down 7% On...

Dollar Soars On The U.S. Jobs Report, Driving Oil Down 7% On The Week

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Oil prices used to rise nearly immediately in response to positive U.S. jobs reports. no longer.

WTI, or the U.S. West Texas Intermediate, fell to the low $70s while Brent, the worldwide benchmark, fell to below $80 per barrel as a result of a weaker-than-expected U.S. employment report for Jan that instead strengthened the currency, which hurt commodities.

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According to the NFP, or nonfarm payrolls, data from the Labor Department, 517,000 jobs were gained last month. In comparison to December’s revised NFP number of 260,000, it was over three times more than the expected growth of 188,000.

The New Dilemma Faced By the Federal Reserve

The Federal Reserve faced a new dilemma as a result of the outperformance; it had hoped that its rash raising rates over the previous year had adequately cooled the labor market and prices to bring inflation down to its target level.

West Texas Intermediate, or WTI, crude for March that was traded on the New York exchange ended the month down $2.49, or 3.2%, at $73.39 a barrel as the dollar’s resurgence following the same jobs report ended crude’s initial gain on the report.

By mid-morning, the dollar had recovered from its 10-month lows, making goods priced in U.S. dollars more expensive for those who did not own dollars. Oil crashed in a sea of red alongside gold and other basic materials.

The U.S. crude benchmark fell by just over 7.5% for the week, which, along with the decrease of almost 3% in the last week of January, opened a fresh wound on oil market mood for February. WTI was down around 7% so far this month, adding to its nearly 9% decline over the previous three months.

Oil prices Driving Oil Down

After hitting a three-week low at $79.89 a barrel, London-traded Brent oil for March delivery ended the day down $2.23, or 2.7%, at $79.94. Following a loss of almost 3% the previous week, the global crude standard was down roughly 7.5% for the week. Brent has dropped 5.4% so far in February, adding to its combined 6.5% decline in January and December.

Consumer price index (CPI) inflation reached four-decade highs in June when it increased by 9.1% annually. The CPI expanded by 6.5% annually in December, which was the weakest rate since October 2021. However, that exceeded the Fed’s aim of 2% annually by more than 3 times.

Also Read: 10 Different Steps Your Businesses Needs to Take After a Data Breach

Bottom Line

Since the Energy Information Administration (EIA) this week revealed a sixth consecutive weekly rise in U.S. crude along with fuels surpluses, the price of oil has been declining.

The EIA said in its Weekly Petroleum Status Report that during the week ending January 27, U.S. crude inventories increased by 4.14 million barrels.

The build exceeded the 0.376M predicted by industry experts and was higher than the 0.533M increase recorded by the EIA for the week ending January 20.

For comparison, the EIA reported that 34.5M barrels of crude were added overall over the previous six weeks. According to the EIA, the U.S. Energy Department’s statistical division, oil stockpiles are at their greatest level as of right now since June 2021.

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