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What Does U.S. Economic News Mean For Oil?

As a rule, I try to stay focused on energy here, and reference broad economic conditions only as one of the many factors that influence those markets. In that context, any single economy, even one as big as the U.S., is not that significant. Right now, though, fears about global growth are dominating oil prices, and the U.S. remains one bright spot in an otherwise sluggish global picture. Data released Friday morning, however, suggest that that may be changing, so a look at the U.S. economy is justified.

The jobs report released by the U.S. Labor Department is one of the most important sets of numbers every month. That has been especially true during the recovery from the last recession. Early on, a healthy jobs market was seen as the main indicator of the pace of recovery, but recently the import of the report has changed. It is now parsed to give clues as to what the Fed is likely to do.

That has resulted in the stock market behaving counterintuitively at times. This morning, for example, we learned that less jobs were added in September than predicted, but the stock market jumped, and oil followed suit. The weakness was seen as making it even more likely that the Fed would cut interest rates further. That would cause bond yields to fall and make stocks more attractive on a relative basis, so the jump in the major stock indices makes sense.

What doesn’t necessarily make sense is oil following stocks on the news.

(Click to enlarge)

Obviously,…





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