Crude oil futures closed lower on Monday (Dec. 5) as markets worried that a higher-than-expected rise in the services sector index could prompt the U.S. Federal Reserve (Fed) to further aggressively raise interest rates.
- WTI crude futures dropped $3.05, or 3.8%, to settle at $76.93 a barrel.
- BRENT crude futures dropped $2.89, or 3.4%, to settle at $82.68 a barrel.
Initially, crude oil futures were boosted by the agreement of the Organization of the Petroleum Exporting Countries and OPEC+ to cut production by 2 million barrels per day. At the meeting on Sunday, December 4, the production policy was reconfirmed.
However, the crude oil contract fell later after the latest U.S. economic data was better than expected. This could confirm the Fed in its plan to raise interest rates even further, as inflation is still far com target.
The U.S. Institute for Supply Management (ISM) reported last night that the November non-manufacturing PMI rose to 56.5 from 54.4 in October, beating expectations of 53.1, with an index above 50 indicating expansion.
Already last Friday, the U.S. Bureau of Labor Statistics reported that nonfarm payrolls rose by 263,000 in November. Average hourly earnings for workers rose 5.1% year-over-year. The hourly earnings figures are the data the Fed focuses on as an indication of inflation.
The European Union (EU) has reached an agreement on the price cap for Russian oil at a price of $60 per barrel. This has been in effect since December 5. In addition, the meeting established that these measures will be continuously reviewed so that the price ceiling is at least 5% below the average market price.
The measure to cap Russian oil prices aims to reduce Russia’s revenue from oil sales that would finance the war in Ukraine. However, it must not affect global oil supplies to the point of causing shortages.
The Spot Market is Open
Tuesday, December 6, 2022