By Barani Krishnan
Investing.com -- The oil bears have tasted blood, and they aren’t stopping.
U.S. crude futures tumbled another $4 to test the $95 per barrel support on Wednesday as pessimism from recession talk and a rocketing dollar ahead of more rate hikes by the Federal Reserve shook the roots of this year’s oil rally. In the previous session, West Texas Intermediate, the benchmark for U.S. crude, lost almost $9 after a test of $97.
Brent, the global benchmark for crude, plumbed below $100 the first time since April 25. On Tuesday, Brent lost almost $11 after a test of $101.
The Dollar Index, which pits the greenback against six major currencies, continued its ascent from overnight, leaping to above 107, its highest since December 2002. The dollar has rallied with few stops since November last year on bets of aggressive rate hikes by the Federal Reserve, or Fed, which has just started delivering on those expectations.
Oil’s latest move lower came as a closely-watched gauge of the US services sector fell to its lowest in 20 months in June, although it held up better than economists expected due to pressures from high costs for labor and other inputs.
Separately, the U.S. Labor Department signaled that the red-hot labor market may be starting to cool. Job openings, as measured by its monthly survey, fell in May, to a level of 11.254 million that is still high by historical comparison. The number was around a quarter of a million more than expected ahead of time, and the department also revised May's number substantially higher to 11.681 million.
The job openings data came ahead of Friday’s more important June nonfarm payrolls report, which is expected to show a smaller jobs growth compared with May. Economists tracked by Investing.com say some 268,000 payrolls were probably added last month — versus the 390,000 in May — holding unemployment at 3.6% for a third straight month. A jobless rate of 4% or below is seen by the Fed as full employment.
“While our view remains that higher consumer prices are required to balance the oil market this summer, we acknowledge that significant and large shocks continue to distort fundamentals,” analysts at Goldman Sachs said in an energy market outlook.