Crude oil prices dropped significantly in the previous session, settling at their lowest since January 2024. This came after official data showed the US economy added fewer jobs than expected last month, leading to recession worries among investors, and weak Chinese economic data added more pressure.

Brent crude futures settled down $2.71, or 3.41 per cent, to $76.81 a barrel. US West Texas Intermediate crude futures settled down $2.79, or 3.66 per cent, at $73.52. At their session lows, both benchmarks fell by more than $3 per barrel. On the multi-commodity exchange (MCX), crude oil futures plunged nearly five per cent and settled 4.75 per cent lower at ₹6,130 per barrel.
 

OPEC+ sticks to output policy of 5.86 million barrel pullback per day, hints at unwinding cuts from October
 

What's weighing on crude oil prices?

-US job growth slowed more than expected in July, and unemployment increased to 4.3 per cent, raising fears of a possible recession in the world's largest economy. The data triggered Wall Street to deepen its losses, with the tech-heavy Nasdaq composite index crashing three per cent on Friday, August 2, and the S&P 500 almost hitting its worst day in two years.

Economic data from China, the top oil importer, and surveys showing weaker manufacturing activity across Asia, Europe, and the US raised the risk of a sluggish global economic recovery that would weigh on oil consumption. Falling manufacturing activity in China also inhibited prices, increasing concerns about demand growth after June data showed imports and refinery activity lower than a year earlier.

-Data from LSEG Oil Research showed that Asia's crude imports in July fell to their lowest in two years, sapped by weak demand in China and India. A Reuters survey found that OPEC oil output rose in July, as a rebound in Saudi Arabian supply and small increases elsewhere offset the impact of ongoing voluntary supply cuts by other members and the wider OPEC alliance.

-The Organization of the Petroleum Exporting Countries (OPEC) pumped 26.70 million barrels per day (bpd) last month, up 100,000 bpd from June, according to the survey based on shipping data and information from industry sources. An OPEC meeting on Thursday had left the group's oil output policy unchanged, including a plan to start unwinding one layer of production cuts from October.

-Oil investors are also watching the Middle East, where Lebanon's Iran-backed group Hezbollah said its conflict with Israel had entered a new phase. Still, analysts noted no material disruption of oil supplies from the region as prices slumped to multi-week lows days after the killing of senior leaders of Iran-aligned militant groups Hamas and Hezbollah stoked fears of all-out war.
 

Wall Street today: S&P 500 set for worst day since 2022, tech-heavy Nasdaq crashes 3% on weak US jobs data
 

Where are prices headed?

Analysts said that reports of a retaliatory strike on Israel following the killing of Hamas political leader Ismail Haniyeh heightened geopolitical tensions in the Middle East, pushing prices to a one-week high of $78.90/bbl. 

‘’The contraction in US manufacturing PMI for the fourth consecutive month in July and increased jobless claims sparked recession fears. It hurt demand prospects, causing prices to drop sharply to $76.20/bbl…OPEC+ tentatively plans to revive halted production next quarter, with approximately 540,000 barrels per day expected to be added in the fourth quarter,'' said Kaynat Chainwala, AVP-Commodity Research, Kotak Securities.

Gold prices today: Yellow metal hits two-week high after poor US jobs data lifts Wall Street rate cut bets

‘’The weak US economic data heightened demand concerns, offsetting supply worries. The downward trajectory of the Chinese economy does not support the demand for crude oil. However, hopes of a US Fed rate cut and ongoing tensions in the Middle East are providing some support for oil prices at lower levels. We expect crude oil prices to remain volatile. Crude oil has support at $75.40-74.50 and resistance at $76.80-77.50. In INR, crude oil has support at ₹6,370-6,310 and resistance at ₹6,510-6,580,'' said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.