Crude oil prices fall this week but wholesale gas increases

Cold weather lifted European gas prices but crude oil is trading at three-month lows after weak US jobs data

Fri, 03 May, 2024 - 15:59

Crude oil prices are trading at three-month lows after weaker-than-expected US jobs data, although European wholesale gas prices ended the week higher on demand for heating, following the cold weather system across most of Europe.

The price of Brent crude traded slightly higher in the latest session to $83.84 a barrel, but has fallen in the past week.

Investors are concerned that higher-for-longer interest rates by the US Federal Reserve will curb economic growth in the US, the world’s leading oil consumer, as well as in other parts of the world.

Brent was on course for a weekly decline of about 6%.

"We view the commodities sell-off over the last two days as collateral damage from the Fed repricing and non-fundamental in nature," JP Morgan analysts wrote in a research note.

European wholesale gas prices settled at around €31 per megawatt on Friday, up over the past week.

US job growth slowed more than expected in April and annual wage gains cooled, data showed on Friday, prompting traders to raise bets that the US central bank will deliver its first interest-rate cut this year in September.

The Fed held rates steady this week, and flagged high inflation readings that could delay rate cuts. Higher rates typically weigh on the economy and can reduce oil demand. Geopolitical risk premiums, due to the Israel-Hamas war, have also faded as the two sides consider a temporary ceasefire and hold talks with international mediators.

Commerzbank analyst Barbara Lambrecht said:

Hopes of a ceasefire and a sharp rise in US crude-oil inventories have caused the price of a barrel of Brent crude to slip below $85.

Further ahead, the next meeting of Opec+ oil producers — members of the Organisation of the Petroleum Exporting Countries and allies including Russia — is set for June 1.

Three sources from the Opec+ group said it could extend its voluntary oil output cuts beyond June, if oil demand does not increase.

JP Morgan, which expects Opec+ to extend cuts beyond June, said: “The stock-builds in April will turn into draws in May through August and can push prices into the $90s in September.”