WTI slides amid greenback strength and mixed US labor data as global recession looms
WTI drops more than 1% as a stronger US Dollar and Fed tightening speculations weigh on dollar-denominated commodities. Mixed signals from US labor market data and improved business activity intensify prospects of a June rate hike. Recession fears sparked by business activity measures in China and Europe threaten to dampen oil demand.
Western Texas Intermediate (WTI) slumps more than 1%, as speculations for further tightening by the US Federal Reserve (Fed) underpins the greenback, a headwind for dollar-denominated assets. At the time of writing, WTI is trading at $70.94 after hitting a daily high of $72.30.
WTI pressured: Fed speculations and global economic jitters dent oil’s upward trajectory
US data revealed on Thursday gave mixed signals about the labor market. US unemployment claims rose above estimates, while a drop in job vacancies, as revealed by the JOLTs report, flashed the labor market is cooling. Nonetheless, the ADP National Employment Report for June crushing estimates could refrain the Fed from pausing for a second straight meeting.
In the meantime, a measure of business activity in the US in the services sector improved. That keeps traders braced for a 25 bps rate hike in June, as the CME FedWatch Tool shows odds remaining above 90%.
Additionally, the latest Fed minutes showed that policymakers agreed to pause the ongoing tightening cycle, despite most officials wanting to raise rates in June.
Meanwhile, global measures of business activity in China and Europe sparked recessionary fears, which could dent oil demand.
The US Energy Information Administration (EIA) revealed that US crude stockpiles fell more than estimates last week. Inventories dropped by 1.5 million barrels in the last week, above forecasts of 1 million.
OPEC ministers and oil company executives told a two-day Vienna conference that governments needed to turn their attention from supply to demand.