Oil prices slump on G7 fuel release

Oil prices have dropped on Friday as G7 nations agreed to a major release of fuel reserves, while Wall Street stocks jumped after data showed that job creation withered last month.

G7 leaders have agreed to release 100 million barrels of diesel and crude oil from their reserves over four months and to “refrain from export restrictions on energy”.

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US oil prices dropped sharply — as much as five percent at one point — while international benchmark Brent crude briefly fell back below $100 per barrel.

The move came following pressure from President Donald Trump to tap the EU’s strategic diesel reserves or face a US ban on diesel exports.

While exports of crude oil from the Middle East have been returning to near pre-war levels in recent weeks, the situation for fuels like diesel remains tight due to refineries being damaged during the conflict.

Russian refineries have also suffered damage due to Ukrainian strikes.

“Diesel is now a macro problem as much as an energy one, feeding directly into freight, food, industry, inflation and ultimately bond yields,” noted Stephen Innes of SPI Asset Management.

“Strategic stock releases can cool the immediate price shock, but drawing down insurance ahead of winter is hardly a comfortable signal,” he added.

– US job creation withers –

Wall Street’s main stock indices rose after data showed that employment in the United States grew by 29,000 jobs in September, missing analysts’ expectations of around 90,000, with the unemployment rate rising slightly to 4.2 percent.

Adding to the weak data, the Bureau of Labor Statistics (BLS) also revised down job figures for July and August by a combined 60,000, the department said in a statement.

The revision to July’s data showed that the world’s largest economy lost jobs that month, as opposed to posting a gain of 21,000 as previously reported.

“Today’s report may revive the ‘bad news is good news’ narrative, but hoping for a weaker labor market just to secure easier financial conditions is a poor tradeoff,” said eToro analyst Bret Kenwell.

The yield on the 10-year US Treasury note briefly fell below 5.2 percent as investors saw the weak labour market as further reducing the likelihood of another immediate interest rate hike by the Federal Reserve.

Markets have been unnerved in recent weeks by fresh multi-year peaks for government bond yields, especially in the United States, as central banks raise interest rates in a bid to cool inflation.

Eurozone inflation surged to 3.8 percent in September, the highest level in three years, as the war in the Middle East fuelled a surge in energy costs, official data showed Friday.