- Reports on Wednesday revealed that the members of OPEC+ were planning to boost production again in October.
- US job openings came in at 7.18 million compared to the forecast of 7.38 million.
- Private US employment rose by 54,000, well below the forecast of 73,000.
Oil prices collapsed further on Thursday as traders worried about an oversupply amid reports of another OPEC+ production boost. In parallel, downbeat US employment figures raised concerns about the state of the economy and demand for oil.
WTI futures (Source: NYMEX, Bloomberg)
Reports on Wednesday revealed that the members of OPEC+ were planning to boost production again in October. The move could come during Sunday’s meeting. The group is more concerned about regaining its market share rather than supporting prices. However, higher production will increase supply, loosen the market, and weigh on prices.
“If output is raised in line with new quotas, we see the market moving into a sizeable surplus from September 2025 through 2026, with inventories building unless countered by renewed restraint,” said Ole Hvalbye, an analyst at SEB bank.
Oil was also pressured after US data revealed a drop in job vacancies. Openings came in at 7.18 million compared to the forecast of 7.38 million. It indicated weak demand for labor. Moreover, it escalated worries about the already weak labor market.
Meanwhile, data on Thursday revealed that private employment rose by 54,000, well below the forecast of 73,000. This was yet another reason for traders to worry about employment.
A weak labor market is bearish for oil as it reduces consumer spending and hurts economic demand. However, in the long run, it is bullish for oil since it pressures the Fed to lower borrowing costs. Low interest rates spur the economy and revive demand.
After Wednesday’s report, market participants were pricing a 97% chance of the Fed lowering borrowing costs. However, this outlook could keep changing with incoming data. Market participants are now looking forward to the nonfarm payrolls report.
According to estimates, the economy added 75,000 new jobs in August. Meanwhile, the unemployment rate jumped to 4.3%. If data comes in line with estimates, rate cut bets will remain largely unchanged. On the other hand, a downbeat or upbeat report will affect rate cut bets.
Notably, a poor report would increase the likelihood of a 50-bps rate cut. Such an outcome would weaken the dollar and make oil less expensive for foreign buyers.
