Oil was trading down slightly on Thursday but largely holding onto its gains from the previous day, which saw the U.S. benchmark rally over 2.9%. American jobs data are feeding cautiously into optimism that the Federal Reserve remains on track for rate cuts, and another big drawdown in U.S. crude inventories lends further support to crude prices.
On Thursday at 11:19 a.m. ET, Brent crude was trading at $84.63, down 0.53%, while WTI was holding onto its gains for the most part at $82.46, down 0.47%, maintaining the narrowing Brent-WTI spread.
While U.S. jobs data released on Thursday showed a larger-than-expected increase in unemployment benefit applications for the week ended July 1, Reuters reports that there was no notable change in the labor market. Additionally, the month of July often sees higher unemployment benefit applications due to temporary factory closures at this time of year.
New unemployment benefit applications rose by 20,000 last week, hitting 243,000-the highest since the fourth-quarter of 2021, according to Bloomberg.
Analysts are looking for the labor market to cool down, along with inflation, for the Fed to remain on track to cut interest rates, potentially starting in September.
Since the beginning of this year, jobless claims have continued to rise, suggesting that the labor market is loosening.
"We think the rise so far is consistent with a cooling labor market that is characterized more by a slower pace of hiring rather than by higher layoffs," Reuters quoted Nancy Vanden Houten, lead U.S. economist at Oxford Economics as saying on Thursday.
On Wednesday, the Energy Information Administration (EIA) reported a larger-than-expected draw on U.S. crude inventory stockpiles. For the week to July 12, the EIA recorded a 4.9-million-barrel draw. The previous week also saw a draw of 3.4 million barrels. Crude oil inventories in the United States are now roughly 5% below the five year average for this time of year.
By Charles Kennedy for Oilprice.com
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