Oil plunged on Thursday morning, after an unexpected increase in weekly U.S. jobless claims added to a cautious view from the Fed about the U.S. economic recovery to weigh on prices.
As of 10:29 a.m. EDT on Thursday, WTI Crude was down 3 percent at $41.64, and Brent Crude was trading down 2.16 percent at $44.41.
The surprise increase of U.S. weekly jobless claims to return to above the 1 million mark weighed on oil prices, as well as on the stock market in New York, which opened lower on Thursday.
Initial claims for unemployment insurance in the week to August 15 jumped to 1,106,000, up by 135,000 from the previous week’s revised level, the Department of Labor said early on Thursday.
The increase in the jobless claims added to concerns about the pace of the economic recovery in the United States, and by extension – of the oil demand recovery.
The oil and equity markets had already reacted with declines after the Fed released on Wednesday the minutes from its July 28-29 meeting.
The participants in the meeting “noted that the path of the economy would depend significantly on the course of the virus and that the ongoing public health crisis would weigh heavily on economic activity, employment, and inflation in the near term and posed considerable risks to the economic outlook over the medium term,” the U.S. Federal Reserve said.
An additional concern for the oil market was Wednesday’s meeting of the OPEC+ panel, the Joint Ministerial Monitoring Committee (JMMC), which said that “the pace of recovery appeared to be slower than anticipated with growing risks of a prolonged wave of COVID-19.”
The EIA’s weekly report also had some analysts wonder whether U.S. fuel demand recovery has stalled.
Despite the crude oil and gasoline inventory draws the EIA reported on Wednesday, ING strategists Warren Patterson and Wenyu Yao noted that “total refined products demand in the US was down 2.21MMbbls/d WoW.”
By Tsvetana Paraskova for Oilprice.com
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