After breaking the WTI $70 resistance level Thursday with 2.8% gains for both key benchmarks, prices have since slid, but with a weaker-than-expected jobs report, the Fed is now likely to delay tapering, giving more impetus to oil prices in the short term.
WTI was trading at $69.81 at 10:57a.m. EST, while Brent was at $72.95.
By August 18th, oil had posted its longest losing streak in 18 months after the fed report.
Now, the new jobs data will give the Fed an excuse to push off the taper, possibly until October, so oil prices should respond positively, cutting the long-running losing streak.
Softening demand and worker shortages as a result of COVID-19 lent to slowed August job growth, with data coming in weaker than expected, but still showing a sustained economic expansion. Nonfarm payrolls were up 235,000 in August, far below their over 1 million surge in July. Many analysts found this disappointing.
But there are plenty of cross-currents in the August jobs report, and oil prices should benefit.
“The bad news is that it missed by two thirds basically of expectations and the good news is that it gives the Fed cover to push off tapering. It just means more Fed for longer,” Thomas Hayes of Great Hill Capital in New York, told Reuters on Friday.
"My guess is the announcement will be in November instead of September and the implementation will probably be late this year or more likely early next year. Beginning taper in October is now off the table."
Oil prices have a history of responding negatively to Fed tapering. Most notably, in the summer and fall of 2014, oil investors fled the market when the Fed was tapering bond purchases. That massive sell-off further accelerated the oil price slide.
By Julianne Geiger for Oilprice.com
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