Oil Dips on Lowered US Interest Rate Cut Expectations and OPEC+ Decision

By Nicole Jao

NEW YORK – Oil prices dipped on Friday, marking a third consecutive weekly loss as investors assessed OPEC+ assurances against recent U.S. jobs data, which diminished expectations for an imminent cut in Federal Reserve interest rates.

Brent futures closed 25 cents lower at $79.62 per barrel, while U.S. West Texas Intermediate (WTI) crude dropped 2 cents to $75.53.

Data indicated that U.S. job growth surged beyond predictions in May, suggesting that the Federal Reserve is unlikely to initiate interest rate cuts until at least September.

Following an uncertain inflation outlook, the European Central Bank took the step of implementing its first interest rate cut since 2019 on Thursday.

High borrowing costs can inhibit economic activity and reduce oil demand.

"The jobs report suggested that rates will remain higher for a longer period," stated Andrew Lipow, president of Lipow Oil Associates. "This dampens enthusiasm in the oil market."

The dollar rose by 0.8%, reaching its highest level in over a week shortly after the jobs report was released.

Despite this, oil prices found some support from OPEC+ leaders Saudi Arabia and Russia, who indicated a willingness to halt or reverse output increases.

However, demand concerns led to a third consecutive week of falling crude prices, with Brent down 2.5% and WTI off 1.9%.

Earlier in the week, oil prices declined as analysts interpreted the upcoming OPEC+ meeting as a sign of increasing supply, which typically exerts downward pressure on prices.

The number of active oil rigs in the U.S., an early indicator of future output, fell by four this week to 492, marking the lowest level since January 2022, according to energy services firm Baker Hughes.

In China, data showed that while exports grew for the second consecutive month in May, crude oil imports decreased, raising concerns about demand in the world’s largest crude buyer.

"Exports significantly exceeded expectations," commented Tamas Varga of oil broker PVM. "However, the continued decline in overall imports is worrying for the oil market."

In Russia, the Novoshakhtinsk oil refinery in the southern Rostov region faced significant disruptions following a fire triggered by a drone attack on Thursday.

Moreover, money managers reduced their net long positions in crude futures and options for the week ending June 4, reported the U.S. Commodity Futures Trading Commission (CFTC).