Oil prices decline as data suggests weakening U.S. economy

Oil prices fell in early trade on Thursday, influenced by weaker-than-expected U.S. employment and business activity data. This suggests a potential cooling of the economy in the world’s leading oil-consuming nation. Brent crude futures dropped 30 cents to $87.04 a barrel, while U.S. West Texas Intermediate (WTI) crude futures fell 32 cents to $83.56 by 0030 GMT. Activity was thin due to the U.S. Fourth of July holiday.

In the U.S., recent data showed that first-time applications for unemployment benefits increased and the number of jobless individuals reached a 2-1/2-year high by the end of June. The ADP Employment report revealed that private payrolls grew by 150,000 jobs in June, falling short of the expected 160,000 increase. The ISM Non-Manufacturing index, a gauge of U.S. services sector activity, dropped to a four-year low of 48.8 in June, well below the consensus of 52.5 due to a significant decline in orders.

Despite the weak economic data, analysts believe that it may push the Federal Reserve to consider rate cuts, which could support oil markets by boosting demand. ANZ Research analysts noted that recent data aligns with the Fed’s inclination towards easing monetary policies. A slowdown in growth momentum could lead to disinflationary pressures in the future, prompting the Fed to lower rates. This anticipated move could potentially benefit the oil market in the long run.