This past week, oil prices witnessed their largest drop in three months. US employment data weaker than expected, sparking speculation of a Federal Reserve interest rate cut.
By the week’s close, Brent crude had fallen over 7%, settling at $82.96 per barrel, while U.S. West Texas Intermediate (WTI) dropped by 1.06% to $78.11 per barrel.
The decline in oil prices is primarily attributed to concerns that prolonged higher borrowing costs could curb economic growth in the U.S., the world’s largest oil consumer.
Amid these developments, the futures markets have begun to price in not just one but potentially two rate cuts of 25 basis points each by the end of the year.
This adjustment in expectations is a response to both the soft job market and the broader implications for monetary policy and economic health.
These economic signals have crucial implications for global oil markets. They highlight the sensitivity of commodity prices to changes in U.S. monetary policy and economic performance.