By Barani Krishnan
Investing.com — The Biden administration did not just snuff out this week’s rally in natural gas. It also pulled out the bottom from under the run-up in oil, with a tentative deal on Thursday to avert a railway workers’ strike that could have crippled the delivery of energy to homes in America.
A deal between major U.S. railroads and unions representing tens of thousands of workers was reached after about 20 hours of talks brokered by the administration, Labor Secretary Marty Walsh said.
The strike would have further reduced coal stockpiles that had already been thinned by poor rail service, complicating the high dependence on this source of energy amid tightness in supply of competing fuels like oil and gas. Electricity shortages and sky-high prices in coal-dependent parts of the country would have been very likely.
Crude prices closed the day down almost 4%.
lost almost 10%, rolling back everything it gained a day earlier, and more, on speculation that the railroad strike could happen by Friday.
The labor deal that averted the strike also sent U.S. and down by about 5%.
“This agreement saved the economy from further intensifying inflationary pressures and avoided the U.S. economy a daily economic hit of about $2 billion,” said Ed Moya, analyst at online trading platform OANDA.
“Oil fundamentals are still mostly bearish as China’s demand outlook remains a big question mark and as the inflation-fighting Fed seems poised to weaken the US economy,” added Moya.
More than 60 million people in 33 cities across China have been placed under partial or full lockdowns, as authorities double down on stamping out coronavirus outbreaks.
New York-traded , which serves as the U.S. crude benchmark, settled down $3.38, or 3.8%, at $85.10 per barrel, after a session low at $84.56. Just last week, WTI hit a seven-month low of $81.20, before returning to above $90 on Wednesday.
, the London-traded global benchmark for oil, settled down $3.26, or 3.5%, at $90.84 per barrel, versus its intraday low of $90.05. Brent hit a January trough of $87.25 last week.