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Oil prices plummet! Job data shakes markets – What's next?

Oil prices plummet, job data shakes markets

On Friday, the price of crude oil experienced a notable decline of around 2%, concluding the entire week with negative results. This downward trajectory was directly correlated with the release of data from the U.S. labor market, which, in turn, diminished the likelihood of swift interest rate cuts in the world's largest economy.

Breaking down the specifics of Friday's market movements, the Brent crude oil price registered a decrease of 1.83%, settling at $77.26 per barrel. Simultaneously, the U.S. West Texas Intermediate crude oil witnessed a drop of 2.21%, reaching a level of $72.19 per barrel.

Consequently, the term "black gold" is currently at its most affordable in 13 consecutive sessions. This trend was predominantly fueled by the publication of U.S. employment data, signaling a labor market strength surpassing economists' initial expectations.

Analyzing the details provided by the latest report from the U.S. Bureau of Labor Statistics, the change in nonfarm employment for January 2024 reached an impressive 353,000 jobs. This figure not only significantly outperformed the pessimistic forecasts of 187,000 jobs but also exceeded the data from the previous month.

It's noteworthy that the data for the preceding month underwent a revision, elevating the figure to 333,000 jobs from the initially reported 216,000. This robust growth in employment has a dual impact, bolstering the U.S. dollar and concurrently reducing the probability of rapid interest rate cuts by the Federal Reserve.

A perspective on the market dynamics is offered, stating that prices were on an upward trajectory prior to the report's release. However, the substantial increase in the number of created jobs poses a hindrance to the potential for interest rate cuts. This observation underscores the intricate relationship between economic indicators and monetary policy decisions.

Meanwhile, the latest forecasts from the International Monetary Fund highlight a deceleration in the Chinese economy. The projections anticipate a decline in GDP growth to 4.6% in 2024, with further contraction to approximately 3.5% by 2028.

Such forecasts inevitably cast uncertainties on China's future demand for oil, exerting pressure on oil prices to decrease. This insight into global economic trends underscores the interconnectedness of markets and the potential ripple effects of economic shifts.

On Thursday, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, led by Russia, opted to maintain their extraction policy at an unchanged level.

Looking ahead to March, the group is set to decide whether to extend the voluntary production cuts for crude oil in the first quarter. OPEC+ has devised plans to reduce production by 2.2 million barrels per day during this initial quarter. This decision-making process within OPEC+ holds significant implications for the oil market and geopolitical dynamics.

From a technical standpoint, the analysis indicates that oil has reached the lower boundary within the designated channel on the chart. The prospect of breaking this lower line suggests the potential for further declines, with the next target projected to be around 67.77. Conversely, a rebound could propel oil prices back towards the vicinity of 79.00. This technical analysis provides insights for traders and investors, offering potential scenarios based on chart patterns and trends.


oil daily chart, forex market analysis
XTI/USD, daily chart, MetaTrader, 03.02.2024


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