Crude oil prices face biggest weekly drop since April

By Al Mayadeen English
Source: Agencies
2 Aug 2024 22:53

Crude oil prices are experiencing their largest weekly drop since April, with WTI down 4.9% and Brent down 5.2%, driven by weak US economic data and ongoing global economic concerns.

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In this Sept. 30, 2015, file photo, oil pumps work in the desert oil fields of Sakhir, Bahrain. (AP)

Crude oil prices are on track for their most significant weekly decline since April, following the release of disappointing US economic data and persistent concerns about global economic health.

As of Friday afternoon, US West Texas Intermediate (WTI) crude oil stood at $73.55 per barrel, marking a drop of $2.76, or 3.6%, for the day.

For the week, WTI is down 4.9%, the steepest weekly drop since the 6.9% decline recorded in the week ending April 26. This downturn follows three consecutive weekly decreases of 3.7%, 2.5%, and 1.1%.

On the other hand, UK Brent crude finished Friday's New York session at $76.95 per barrel, down $2.57, or 3.2%, for the day.

Brent's weekly decline of 5.2% is also the largest since the week ending April 26, following previous weekly losses of 1.8%, 2.8%, and 1.7%.

US economy in bad shape?

According to a Sputnik analysis, the sharp drop in crude oil prices was largely triggered by the US Labor Department's report that non-farm payrolls increased by only 114,000 jobs in July, the smallest growth since the pandemic-era jobs boom began.

Moreover, the unemployment rate rose to 4.3%, the highest level since December 2021.

This disappointing jobs report comes on the heels of weak US manufacturing data released the previous day, further sparking concerns about the economy and overshadowing optimism about a potential Federal Reserve rate cut in September.

The Fed's last rate cut occurred in March 2020.

Geopolitical factors

Earlier in the week, oil prices had surged by over 3% each for WTI and Brent after "Israel" waged an aggression against Lebanon and Iran.

Oil traders had anticipated increased geopolitical risks, particularly involving Iran, which had vowed retaliation.

However, as no immediate response from Iran materialized, tensions eased, contributing to the decline in oil prices.

Geo-economic factors

Compounding these concerns are ongoing worries about the Chinese economy and the stance of OPEC+.

The oil-producing alliance, which includes the Saudi-led Organization of the Petroleum Exporting Countries (OPEC) and ten other countries including Russia, announced this week that it will maintain current production levels despite the economic uncertainties.

OPEC+ had previously committed to gradually reducing production by 2.2 million barrels per day between October 2023 and September 2025, with an additional reduction of 3.66 million barrels daily through the end of 2025.