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Oil Prices Drop on Weak US Demand Ahead of Jobs Report

Oil prices edged lower on Wednesday, weighed down by signs of weakening U.S. fuel demand and caution ahead of the upcoming U.S. jobs report, which could influence the Federal Reserve’s monetary policy path.

Brent crude fell to around $84 per barrel, while West Texas Intermediate (WTI) slipped below $80. The decline came after government data showed a surprise rise in U.S. gasoline inventories, raising concerns about slowing summer demand at a time when consumption typically peaks. Street Insider

Softer Demand Sparks Market Caution

According to the U.S. Energy Information Administration (EIA), gasoline stockpiles rose by over 2 million barrels last week, defying expectations of a draw. At the same time, refinery activity dipped slightly and implied fuel demand came in weaker, hinting at a potential cooling in consumer activity amid higher prices and broader economic uncertainty. RP DIgital

This unexpected inventory build has dampened bullish sentiment in the oil market. While supply fundamentals remain relatively tight, softening demand from the world’s largest oil consumer is forcing traders to reassess the near-term price trajectory.

All Eyes on U.S. Jobs Data

Markets are also on edge ahead of the U.S. nonfarm payrolls report due Friday. A weaker-than-expected reading could signal a cooling labor market, which in turn might ease pressure on the Federal Reserve to maintain high interest rates. Conversely, a strong report could reignite fears of prolonged monetary tightening, potentially stifling economic growth and oil demand.

Recent economic indicators have painted a mixed picture of the U.S. economy, and Friday’s data is expected to offer clearer direction on inflationary pressures and the Fed’s next move. For oil traders, this means heightened volatility in the days ahead. Reuters

Outlook Remains Uncertain

Despite ongoing geopolitical tensions and tight global supply conditions, the demand outlook remains fragile. If U.S. consumption continues to falter, oil prices could face further downward pressure, especially if global economic data continues to soften.

In the short term, sentiment will likely be driven by macroeconomic signals rather than supply-side developments. As traders position themselves ahead of the jobs report, oil prices may remain under pressure until more clarity emerges on the health of the U.S. economy.

 

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