June 2 (UPI) -- Perceived weakness on the margins of the U.S. labor sector and the reaction to the U.S. exit from the Paris climate deal hammered crude oil prices early Friday.
U.S. President Donald Trump announced Thursday afternoon his country would start the process of leaving the Paris climate accord, or possibly reconfigure commitments to the agreement. The president said the international agreement put the U.S. economy, the world's largest, at a disadvantage, leaving "taxpayers to absorb the cost in terms of lost jobs, lower wages, shuttered factories, and vastly diminished economic production."
A research note sent Friday by email from Ritterbusch and Associates, an oil trading advisory group based in Chicago, said the Paris deal was having a psychological impact on the price of crude oil.
"Although we view today's apparent bearish reaction to the U.S. exit from the Paris climate accord as much exaggerated, we are forced to concede to some additional chart damage that could press nearby WTI lower to about the $46 [per barrel] level in short order," the note read.
Crude oil prices shifted from gains of around 1 percent to a minor loss after Thursday's announcement. The price for Brent crude oil was down 2.7 percent about 20 minutes before the start of trading in New York to $49.25 per barrel. West Texas Intermediate, the U.S. benchmark for the price of oil, was down 2.8 percent to $47.00 per barrel before the opening bell.
The downturn came despite the reported unemployment rate in the United States for May at 4.3 percent, its best in decades. Since January, the U.S. Labor Department said the number of people classified as unemployed has declined by 774,000.
John Hardy, an analyst with SaxoBank in Denmark, said marginal issues, such as lower hourly wages and a decline in the number of people participating in the labor sector, were disappointing.
"The U.S. May jobs report was an ugly one: this one was ugly virtually across the board," he said in a statement.
Most leading indicators in the May report were relatively unchanged from the previous month.
Elsewhere, market watchers are looking at the U.S. decision on the Paris climate deal as signaling the Trump administration is serious about its pro-oil policies. Ole Hanson, the head of commodity strategy at SaxoBank, told UPI the plan could potentially backfire. He said shale oil production is still efficient, but prices below $50 per barrel for any extended period of time could push many players to the sidelines.
"This could easily backfire on the sector where billions of dollars of debt still need to be refinanced over the coming months," he said. "We may end up seeing the production growth projections being revised lower."