Mixed signals for oil prices as US jobs, OPEC+ keep prices uncertain

The outlook for oil prices remains cloudy after a week of conflicting signals from the global oil market.

Reuters reported that oil prices edged down on Friday, June 7 2024, and posted a third straight weekly loss as investors weighed the Organization of the Petroleum Exporting Countries and allies (OPEC+) reassurances against the latest US jobs data that lowered expectations that the Federal Reserve will cut interest rates soon.

Brent crude futures settled US$0.25 lower at US$79.62 a barrel, while US West Texas Intermediate crude (WTI) fell US$0.02 to US$75.53.

Read also: Can Nigeria pump enough oil to meet OPEC cuts?

While the OPEC+ signaled potential production cuts, stronger-than-expected US economic data dampened hopes of an interest rate cut that could boost demand.

According to Reuters, data showed US jobs growth accelerated far more than expected in May, keeping the Federal Reserve System, the central bank of the US, on track to hold off starting to cut interest rates until September at the earliest.

Andrew Lipow, president of Lipow Oil Associates, said “The jobs report indicated higher rates for longer. That tends to dampen enthusiasm on the oil market.”

On the positive side, OPEC+ members, Saudi Arabia and Russia hinted at a willingness to pause or even reverse planned oil output increases.

This could lead to higher prices, benefiting Nigerian crude exports. Additionally, a recent fire at a major Russian refinery could tighten global supplies, further pushing prices upwards.

However, the positive signals were countered by strong US jobs data that lowered expectations of a Federal Reserve interest rate cut in the near future.

Lower interest rates typically lead to increased economic activity and higher oil demand. Without a rate cut, oil demand might not grow as quickly as anticipated, putting downward pressure on prices.

Furthermore, a decline in Chinese crude oil imports, despite positive export figures, raises concerns about demand in the world’s largest oil importer. This could also negatively impact global oil prices, including those of Nigerian crude.

Read also: Markets await crucial US data as OPEC publishes oil production figures

Domestically, a lower rig count in the US points towards potentially lower future US oil production, which experts say could benefit Nigerian exports in the long term. However, the immediate outlook is uncertain.

Experts advise that oil producers need to be prepared for a volatile market in the coming months.

While the strong US jobs data may initially put downward pressure on prices, unforeseen disruptions or production cuts from OPEC+ may cause prices to swing back upwards.