Oil down on Thursday

Oil prices fell on Thursday amid concerns of weakened demand following disappointing US employment and business data, suggesting a cooling economy.

Brent crude futures dropped 60 cents to $86.74 a barrel, while US West Texas Intermediate (WTI) crude futures decreased 63 cents to $83.25 by 0651 GMT, with trading volumes lower due to the US Independence Day holiday.

Citi analysts noted that despite bullish geopolitical and weather risks, the physical market strength is expected to soften as demand could decrease, influenced by potential hurricane disruptions. US crude exports to Europe hit a two-year low in June, though a rebound is anticipated in July and August.

The price drop is also attributed to profit-taking by traders after recent gains. Both Brent and WTI are on track for a fourth consecutive weekly increase.

Moreover, US data showing increased unemployment claims and a lower-than-expected rise in private payrolls underscored the demand concerns. The ISM Non-Manufacturing index also fell to a four-year low. Analysts noted that weaker economic data might support arguments for the US Federal Reserve to cut rates, potentially boosting oil demand.

Softer US data has increased the likelihood of a September rate cut to 74 per cent, from 65 per cent, with markets expecting 47 basis points of easing this year. A lower interest rate environment could limit dollar strength, favouring WTI crude’s bullish trend.

Attribution: Reuters.