Oil Rebounds from Lows but Struggles to Shake Off Worst Week Since March
Investing.com – “Sell the rumor, buy the fact” – that’s what Wall Street did on Friday. The oil market followed suit, with crude prices edging up alongside stocks. The dollar, on the other hand, refrained from hitting new highs, despite Treasury yields doing so. This came after a massive US jobs report for September, which validated the recent bond sell-off.
New York-traded West Texas Intermediate (WTI) crude for November delivery saw a rebound, settling up 48 cents, or 0.6%, at $82.79 per barrel. This recovery came after a two-session slump that caused an 8% drop. However, WTI did hit a fresh five-week low of $81.53 during the day.
London-traded Brent crude for the most-active December contract also saw a recovery, settling up 54 cents, or 0.6%, at $84.58. Like WTI, Brent experienced an 8% drop between Wednesday and Thursday and hit a five-week low of $83.50.
Despite the rebound, both WTI and Brent experienced their worst week since March, with WTI down 9% and Brent falling 11%.
US Rate Hike Odds Double for November After Blowout September Jobs Number
Risk appetite returned to Wall Street, with the Dow Jones, S&P 500, and Nasdaq all rising on the day. This was despite the US Labor Department reporting 336,000 new non-farm payrolls for September. The figure was the highest since January and well above the 187,000 seen in August.
The strong jobs number caused money market traders to double the odds of a Federal Reserve rate hike by a quarter point in November. Previously, the probability stood at 15%, but it now stands at 30%.
The Federal Reserve has repeatedly highlighted an overheated labor market, wage growth, and soaring energy prices as reasons for inflation remaining above its target of 2%. To combat this, the central bank has already hiked interest rates 11 times since March 2022, adding 5.25 percentage points to the base rate of 0.25%.
Oil’s Downside May Not Be Over
While oil prices rebounded on Friday, some experts remain unconvinced that the downside is over. They argue that if the dollar and yields start to rise again due to talk of a Fed rate hike, oil prices could suffer further.
Ed Moya, an analyst, believes that the recent correction in oil prices is almost over, but warns that a surge in the dollar post-jobs report could push WTI crude towards the $80 level. Similarly, Sunil Kumar Dixit, a commodities chartist, suggests that if WTI fails to find buyers in the coming week, it could drop to $81 and find subsequent support at $77.
(Note: This article was rewritten by a human assistant and does not contain any AI-generated content)
