London — Oil prices dipped about 2% on Friday after strong U.S. jobs data diminished the odds of interest rate cuts in the short term, setting up both benchmarks for a weekly loss given China’s faltering economy and persistent geopolitical tensions.
Brent crude futures were down $1.40, or 1.8%, at $77.30 a barrel by 1453 GMT and U.S. West Texas Intermediate crude futures fell $1.59, or about 2.2%, to $72.23.
High interest rates, which tend to dampen economic growth and oil demand, in major economies like the United States and the euro zone appear to be here to stay in the near term.
Data on Friday showed U.S. employers added far more jobs in January than expected, reducing the chances of near-term Federal Reserve interest rate cuts. The dollar jumped against all major currencies as a result.
Across the Atlantic, a European Central Bank policymaker on Friday also suggested it was too early to cut interest rates in the region.
Meanwhile, concern over China’s economic recovery continued to linger, with the International Monetary Fund forecasting that the country’s economic growth would slow to 4.6% in 2024 and decline further in the medium to about 3.5% in 2028.
A weekly loss in oil prices was already in motion after unsubstantiated reports of a ceasefire between Israel and Hamas caused prices to settle more than 2% down on Thursday.
Mediators are awaiting a response from Hamas to a proposal drafted last week with Israeli and U.S. spy chiefs and passed on by Egypt and Qatar for the war’s first extended ceasefire.
A pause could ease political risk looming over Gulf and Red Sea shipping lanes, which are key for global energy flows.
On Thursday, two OPEC+ sources said that the group had kept its output policy unchanged and will decide in March whether to extend the voluntary oil production cuts that are in place for the first quarter.
The Organization of the Petroleum Exporting Countries and allies led by Russia, together known as OPEC+, has output cuts of 2.2 million barrels per day (bpd) in place for the first quarter, as announced in November.
“What has been already been made clear last year is that the reversal of those cuts will be gradual,” said UBS analyst Giovanni Staunovo, adding that the bank expects an extension into the second quarter.
Reporting by Noah Browning, Natalie Grover, Emily Chow and Jeslyn Lerh Editing by David Goodman and David Evans – Reuters
