Oil prices declined in early trading on Thursday as a result of weaker-than-expected U.S. employment and business activity data. This suggests that the economy in the leading oil-consuming nation may be slowing down. Brent crude futures dropped by 30 cents to $87.04 a barrel, while U.S. West Texas Intermediate crude futures fell by 32 cents to $83.56. Activity was subdued due to the U.S. Fourth of July holiday.
In the United States, recent data revealed an increase in first-time applications for unemployment benefits and a rise in the number of people on jobless rolls. Furthermore, the ADP Employment report showed that private payrolls only increased by 150,000 in June, lower than the expected 160,000, following a rise of 157,000 in May. The ISM Non-Manufacturing index also fell to a four-year low of 48.8 in June, well below the consensus of 52.5.
Despite the weaker economic data, analysts believe that this could prompt the Federal Reserve to start cutting rates, which could be beneficial for oil markets by boosting demand. ANZ Research analysts stated that recent data aligns with the Fed’s inclination to ease, predicting a slowdown in growth momentum that would support disinflationary trends and possibly lead to rate cuts.