Crude oil futures closed in negative territory on Wednesday as a result of a strengthening US dollar and concerns over China’s contracting manufacturing sector. These factors have sparked worries about the economic outlook of China, the world’s largest oil importer.
WTI crude futures declined by $1.37, or 1.97%, settling at $68.09 per barrel. This marked the lowest closing level since March 20. Meanwhile, BRENT crude futures were down 88 cents, or 1.20%, closing at $72.66 per barrel.
Data from Dow Jones Market Data reveals that WTI oil futures experienced an 11.3% decline throughout the month of May, while Brent oil futures were down 8.7%.
The decline in crude futures came in response to China’s May manufacturing purchasing managers’ index (PMI), which registered at 48.8, lower than April’s reading of 49.2. A reading below 50 indicates contraction in China’s manufacturing sector, and the drop was more significant than analysts had anticipated, who had forecasted a figure of 49.4.
The dollar index, measuring the currency against a basket of six major currencies, rose 0.16% to 104.3344 overnight. The dollar’s strength resulted in higher prices for crude oil contracts denominated in dollars, which became more expensive for investors holding other currencies.
Additionally, investors expressed concerns about the latest US labor data released on Tuesday night, which may prompt the Federal Reserve (Fed) to accelerate interest rate hikes to combat inflation. Such a move could impact economic growth and oil demand.
The US Bureau of Labor Statistics published the results of the Job Openings and Labor Turnover Survey (JOLTS), indicating a rise of 358,000 jobs to 10.1 million in April. However, contrary to analysts’ expectations, the figure fell to 9.375 million jobs after three consecutive months of declines.
Market participants are also closely monitoring the US Congress, which is set to vote on the “Fiscal Responsibility Act” bill to increase the debt ceiling on June 1. The bill’s approval by the House of Representatives would require subsequent consideration by the United States Senate. If passed, it will be sent to President Joe Biden for signing into law, ensuring its implementation. The bill must be enacted before the June 5 deadline to avoid a historic default on US debt.
Investors are also keeping an eye on the US Energy Information Administration’s (EIA) crude inventory report, as well as the upcoming OPEC and OPEC Plus meeting on June 4. These events are expected to further impact oil market dynamics.
The Spot Market is Open
Thursday, June 1, 2023
| Energy Updated at | USD Price | Change | %Change |
| Crude Oil 11.30 | 68.48 | +0.39 | +0.57% |