OIL FUTURES: WTI slides nearly 4% as market eyes weakened demand outlooks

New York — Crude oil futures prices fell further Sept. 4, with front-month contracts settling near two-month lows as global demand outlooks dimmed following a mixed US jobs report.

NYMEX October WTI settled $1.60 lower at $39.77/b, while ICE November Brent was down $1.41 to settle at $42.66/b.

US payrolls expanded by about 1.4 million jobs in August, US Labor Department data showed Sept. 4, pushing the unemployment rate down to 8.4%. While the headline jobs figure was in line with market expectations, there were some signs of weakness in the report. About 17% of the monthly job gain was from temporary government hiring for the US Census, and the number of permanent job losses rose 534,000 to 3.4 million, Labor Department data showed.

NYMEX October RBOB settled 2.77 cents lower at $$1.772/gal and October ULSD declined 1.62 cents to settle at $1.1515/gal.

The labor report may be paradoxically bearish for global markets as it may forestall further US stimulus efforts, analysts said.

"The biggest takeaway right now is that with what we've seen in equities and oil prices, a lot of the historic rebound we saw from negative $40/b or so prices to where we are now, a big component of that was that we had unlimited amounts of stimulus, or at least it felt unlimited, that was getting pumped into the economy," OANDA senior market analyst Edward Moya said. "But now we are seeing unemployment beating [US Federal Reserve] expectations. This means that the Fed was overly pessimistic and that is very, very concerning for risky assets that got propped up by the stimulus trade."

Front-month Brent and WTI last settled lower July 9.

US oil demand remains tepid despite the rebound in labor markets. Refined product demand slid 13% during the week ended Aug. 29, US Energy Information Administration data showed Sept. 4 — the largest one-week fall since the week ended April 3, during the ramp-up of nationwide coronavirus lockdowns. The fall pushed weekly product demand to the lowest since the week ended May 29, and the four-week moving average down to a six-week low of 18.28 million b/d.

The crude oil forward structure has turned significantly more bearish in recent days. The contango between front-month and year ahead WTI contracts opened to $3.72/b Sept. 4, the widest since May 27. The contango in front-to-12th month Brent contracts opened to $4.22/b, the widest since May 29.