© Reuters. FILE PHOTO: The sun sets behind the chimneys of the Total Grandpuits oil refinery, southeast of Paris, France, March 1, 2021. REUTERS/Christian Hartmann/File Photo
By Laila Kearney
NEW YORK (Reuters) -Oil prices fell by about 2% on Friday and were headed for weekly losses after U.S. jobs data shrank the odds of imminent interest rate cuts in the world’s largest economy, which could dampen crude demand.
Faltering growth in China and the possibility of some easing of tensions in the Middle East also reduced prices.
futures were down $1.31, or 1.7%, at $77.39 a barrel by 12:58 p.m. EST (1758 GMT) and U.S. West Texas Intermediate crude futures fell $1.47, or about 2%, to $72.35.
Both benchmarks were on track for a loss of about 7% on the week.
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 rate cuts. The dollar jumped against all major currencies as a result.
“Prices were chugging along little changed prior to the report, but a huge beat on jobs created is kicking the can down the road for interest rate cuts,” said Matt Smith, analyst at Kpler.
Across the Atlantic, a European Central Bank policymaker also suggested it was too early to cut interest rates in the euro zone.
Meanwhile, concern over China’s economic recovery persisted, 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 term to about 3.5% in 2028.
A weekly loss for oil prices was already in motion after unsubstantiated reports of a ceasefire between Israel and Hamas caused prices to settle more than 2% lower 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, sources said that the Organization of the Petroleum Exporting Countries and allies led by Russia, together known as OPEC+, had kept its output policy unchanged. The group will decide in March whether to extend the voluntary oil production cuts that are in place for the first quarter, the sources said.
OPEC+ has output cuts of 2.2 million barrels per day (bpd) in place for the first quarter, as announced in November.
Also pushing oil prices lower was an outage at BP (NYSE:)’s 435,000 barrel-per-day Whiting, Indiana, oil refinery following a power outage that disrupted operations on Thursday afternoon, said Bob Yawger of Mizuho bank.
Power at the refinery had been restored by midday on Friday, BP said, but it was unclear how that affected processing.
“You end up with barrels with no place to go that could be shoved into storage,” Yawger said.
