Oil prices declined sharply on Friday, marking the fourth consecutive week of losses as weaker-than-expected U.S. job growth and global economic concerns clouded the demand outlook for crude. Brent crude futures fell by $1.41, or 1.8%, to $78.11 per barrel, while U.S. West Texas Intermediate (WTI) crude futures dropped by $1.59, or 2.1%, to $74.72 per barrel.
The continued decline in oil prices comes as the U.S. economy added fewer jobs than anticipated in July, with unemployment rising to 4.3%. This unexpected slowdown in job growth has raised concerns about the potential for a recession and its impact on crude demand. "Weak economic growth in major economies could stifle oil demand despite increased tensions in the Middle East that could impact supplies," said Ashley Kelty, an analyst at Panmure Liberum.
Data from top oil importer China and a survey showing weaker manufacturing activity across Asia, Europe, and the United States have further fueled fears of a sluggish global economic recovery. The falling manufacturing activity in China, coupled with June data showing lower imports and refinery activity compared to the previous year, has added to concerns about demand growth.
According to LSEG Oil Research, Asia's crude oil imports in July fell to their lowest level in two years, driven by weak demand in China and India. This decline in imports underscores the challenges facing the global oil market as it contends with weak demand from its largest consumers.
In addition to demand concerns, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) held a meeting on Thursday, leaving the group's oil output policy unchanged. The group reaffirmed its plan to start unwinding one layer of production cuts from October, despite the ongoing market softness.
Oil investors are also closely monitoring developments in the Middle East, where the killing of senior leaders of Iran-aligned militant groups Hamas and Hezbollah has stoked fears of a broader conflict that could disrupt oil supplies. Lebanon's Hezbollah has stated that its conflict with Israel has entered a new phase and has pledged to respond after its top military commander was killed in an Israeli strike.
West Texas Intermediate (WTI) crude slid below $75 per barrel, while Brent crude traded below $78, highlighting the market's concerns about demand in the world's two largest economies. Factory gauges in the U.S. and China both showed contractions this week, signaling weakness in manufacturing. The decline in oil prices deepened after U.S. payrolls data missed expectations.
Crude prices experienced a brief uptick on Wednesday following the assassination of Hamas and Hezbollah leaders, which heightened geopolitical tensions in the Middle East. However, this was not enough to offset the broader demand concerns that have weighed on the market.
OPEC+ has indicated that it may adjust its production plans if market conditions warrant. "If the market softness continues, core OPEC+ members might well decide to delay the phasing-out of cuts for another quarter - kicking the can down the road in the hope that demand improves," said Callum Macpherson, head of commodities at Investec Plc.
