On Friday, oil prices rebounded, partially following the broader trend in Wall Street, as crude was bought up alongside stocks. This came after the U.S. reported a robust jobs report for September that validated the recent selloff in bonds.
West Texas Intermediate (WTI) crude for November delivery, traded in New York, settled up 48 cents, or 0.6%, at $82.79 per barrel. This marked a rebound from the 8% drop experienced over the past two sessions, although WTI did touch a fresh five-week low of $81.53 during the day.
Brent crude, the global benchmark, for the most-active December contract, settled up 54 cents, or 0.6%, at $84.58 per barrel. It also recovered after an 8% decline between Wednesday and Thursday, reaching a five-week low of $83.50.
For the week, both WTI and Brent suffered their worst performances since March, with WTI down 9% and Brent down 11%.
Despite the strong U.S. jobs report, which showed 336,000 new non-farm payrolls for September, risk appetite returned to Wall Street. The Dow, S&P 500, and Nasdaq all rose on the day. However, the strong employment data raised concerns about rising Treasury yields and increased the probability of the Federal Reserve hiking rates in November. Some money market traders doubled the odds of a November rate hike from 15% to 30% following the report.
The rise in Treasury yields has been a concern for the Fed, which has already hiked rates 11 times between March 2022 and July 2023 in response to rising inflation and wage growth. The Fed’s actions have added 5.25 percentage points to the prior base rate of 0.25%.
Oil prices have been highly sensitive to the macroeconomic environment, and the recent correction in oil prices could continue if the U.S. dollar strengthens further and yields rise, potentially pushing WTI crude toward the $80 level.
Analysts noted that while oil and stock prices rose on Friday, the dollar and Treasury yields saw limited moves, likely due to profit-taking by currency and bond traders who had anticipated the strong jobs report. The U.S. Dollar Index remained below its recent 11-month high, and yields reached a new 16-year high of 4.89% against the 10-year Treasury note.
Looking forward, oil prices may find support as they seek to stabilize, but the overall trajectory will depend on developments in the macroeconomic environment, particularly movements in the U.S. dollar and Treasury yields.
