By Georgina McCartney
HOUSTON (Reuters) -Oil prices settled down by $1 a barrel on Wednesday after the U.S. government revised sharply lower a set of employment statistics closely watched by investors.
futures settled down $1.15, or 1.49%, at $76.05 a barrel. U.S. West Texas Intermediate crude futures settled $1.24 lower or 1.69% at $71.93.
U.S. employers added far fewer jobs than originally reported in the year through March, the Labor Department said on Wednesday.
“The market is now going from pricing in a stronger economy to a potential hard landing, which is why oil prices are reluctant to move higher,” said Phil Flynn, analyst with Price Futures Group.
The department’s estimate for total payroll employment for the period from April 2023 to March 2024 was lowered by 818,000.
“The sting in the scorpion’s tail that hurts worse than anything is that this data helped create a crisis of confidence,” said Tim Snyder, chief economist at Matador Economics.
The revised jobs data offset support from a drop in U.S. oil inventories, and recently released minutes from the Federal Reserve indicating a likely September rate cut.
stocks, gasoline and distillate inventories fell in the week ending Aug. 16, the Energy Information Administration (EIA) said on Wednesday.
Crude inventories fell by 4.6 million barrels to 426 million barrels in the week, the EIA said, exceeding analysts’ expectations in a Reuters poll for a 2.7 million-barrel draw.
Fed officials last month were strongly leaning toward an interest rate cut at their September policy meeting, and several would have been willing to reduce borrowing costs immediately, according to the minutes of the July 30-31 gathering.
Higher interest rates increase the cost of borrowing, which can slow economic activity and dampen demand for oil.
Meanwhile, investors’ worries persisted over the prospect of economic weakness in China weighing on the country’s crude demand.
China’s economic struggles have contributed to weak processing margins and low fuel demand that has curbed operations at state-run and independent refineries.
“We are measuring everything right now by the Chinese economy and if anything is leaning negative out of China, it is going to pressure energy,” said Matador Economics’ Snyder.
GEOPOLITICAL RISK
Elsewhere, a Greek-flagged oil tanker was adrift in the Red Sea on Wednesday after repeated attacks that started a fire on the vessel and caused the ship to lose power, the UK maritime agency said.
Iran-aligned Houthi militants have launched a series of attacks on international shipping near Yemen since last November in solidarity with Palestinians in the war between Israel and Hamas.
The Red Sea leading to the Suez Canal is a key shipping route for oil, and sustained attacks pose a potential threat to global crude flows.
Meanwhile, U.S. President Joe Biden planned to talk by phone with Israeli Prime Minister Benjamin Netanyahu on Wednesday about ways to keep a potential Gaza ceasefire and hostages deal alive, a U.S. official said.
The call follows U.S. Secretary of State Antony Blinken’s whirlwind trip to the Middle East that ended on Tuesday without an agreement between Israel and Hamas militants on a truce in the Palestinian enclave.