Oil Prices Stable Amid Weak Dollar, US Jobs Data

January 7, 2023
crude oil prices

By Adedapo Adesanya

Oil prices were relatively stable on Friday as the market balanced a weaker US Dollar and mixed jobs reports from the world’s largest oil economy and producer, the United States.

Brent futures fell 12 cents or 0.2 per cent to settle at $78.57 per barrel, while the US West Texas Intermediate (WTI) crude rose by 10 cents or 0.1 per cent to settle at $73.77 per barrel.

Despite the outcome, both crude benchmarks ended the first week of the year lower due to global recession concerns.

The US economy added jobs at a solid clip in December, pushing the unemployment rate back to a pre-pandemic low of 3.5 per cent as the labour market remains tight.

The country’s central bank embarked last March on its fastest interest rate-hiking cycle since the 1980s, and this new development is underpinning the economy by sustaining consumer spending.

It, however, raises the risk the US Federal Reserve could lift its target interest rate above the 5.1 per cent peak it projected last month and keep it there for a while.

The US jobs report caused the US Dollar to rally as investors bet that inflation is easing and the US Federal Reserve does not need to be as aggressive as some feared when it comes to rate hikes.

A weaker US Dollar can boost demand for oil as dollar-denominated commodities become cheaper for holders of other currencies.

Also, US demand concerns were raised after a report showed US manufacturing contracted further in December, dropping for a second straight month to 48.4 from 49.0 in November, according to the Institute for Supply Management (ISM).

In the world’s second-largest economy, China, investors’ expectations that the Chinese economy would soon emerge from its COVID woes and stage a robust recovery in 2023.

However, more countries around the world are demanding visitors from China take COVID tests days before China drops tough restrictions.

In Europe, inflation tumbled last month, but underlying price pressures are still rising, and economic growth indicators are still moderate. Analysts suggest that the European Central Bank (ECB) will keep raising interest rates for months to come.

There are expectations that economic growth in the world’s second oil importer, India, will slow in the financial year ending March as pandemic-related distortions ease and pent-up demand for goods levels out going into 2023.

Adedapo Adesanya

Adedapo Adesanya is a journalist, polymath, and connoisseur of everything art. When he is not writing, he has his nose buried in one of the many books or articles he has bookmarked or simply listening to good music with a bottle of beer or wine. He supports the greatest club in the world, Manchester United F.C.

Leave a Reply

Olalekan Akinwumi
Previous Story

Nigerian Facility Managers Elect Olalekan Akinwumi as President

Local Stock Exchange
Next Story

Local Stock Exchange Rebounds by 0.70% Amid Weak Sentiments

Latest from Economy

Don't Miss