Crude oil futures fell more than 1% on the day, with WTI falling below $76, while Brent crude fell $82 as investors worried that the US crude futures would fall below $76. A strong US labor market and service sector will be a factor in pushing the US Federal Reserve (Fed) to speed up interest rate hikes.
At 6:21 p.m. Thai time, West Texas Crude Oil Contract (WTI) for delivery in January. which traded on the NYMEX, minus $ 0.98, or 1.27%, to $ 75.95 / barrel. Brent crude lost $0.99, or 1.2%, to $81.69 a barrel.
The Fed’s interest rate hike will result in a stronger dollar. which will reduce the attractiveness of the contract By making oil contracts more expensive for holders of other currencies.
The Institute for Supply Management (ISM) said its service sector index rose to 56.5 in November from 54.4 in October and beat expectations of 53.1. Level 50 indicates expansion of the service sector.
The US Department of Labor said that Non-farm payrolls rose by 263,000 in November. That beat analysts’ expectations of 200,000 jobs and average hourly wages for workers rose 5.1 percent year on year. That was above the 4.6% expected. Hourly wages are the primary focus of the Fed for signs of inflation.
Investors expect the Fed to raise interest rates past 5.0% in the middle of next year following the release of a strong jobs report. Although the Fed has raised interest rates by 0.75% for four consecutive times. This indicates that the Fed’s tightening of monetary policy in the past has not been able to dampen the heat in the labor market. This has led to expectations that the Fed will continue to raise interest rates next year to slow the economy and stem a spike in inflation.
CME Group’s FedWatch Tool indicates that investors now expect the Fed to raise interest rates to a range of 5.00-5.25% in May 2023. After previously forecasting a level of 4.75-5.00%
Investors keep an eye on the impact of the European Union (EU) and G7 Russian crude oil price ceiling measures that began to take effect yesterday.
The American Petroleum Institute (API) US crude inventories will be released today, while the US Energy Information Administration (EIA) will be released tomorrow.