Oil Pares Weekly Drop as U.S. Job Growth Improves Demand Outlook

(Bloomberg) -- Oil pared a weekly decline as strong U.S. jobs growth improves the outlook that rising demand may counter the supply glut roiling the market since 2014.

Futures rose 1.1 percent in New York Friday, trimming a weekly drop to 0.3 percent. While American production hovers at its highest since July 2015 and output from OPEC climbed last month, sliding stockpiles and the prospects for improved demand growth lent to a more positive sentiment. The U.S. economy added 209,000 payrolls in July.

"The good jobs report made people think that the economy is still going strong and demand will be rebalancing the market faster than expected," Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by telephone.

Oil Pares Weekly Drop as U.S. Job Growth Improves Demand Outlook

The U.S. benchmark settled above $50 a barrel earlier this week for the first time since May, following an 8.6 percent rally last week, the biggest this year. The breach of the key level didn’t last long, though, as doubts still linger that the Organization of Petroleum Exporting Countries and its allies will succeed in rebalancing the market. Russia says it has kept output levels from May and plans to do so until the OPEC production-cut pact expires.

West Texas Intermediate for September delivery added 55 cents in its biggest one-day rally of the week, settling at $49.58 a barrel on the New York Mercantile Exchange. Total volume traded was about 2.3 percent below the 100-day average.

Brent for October settlement gained 41 cents to close the session at $52.42 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $2.69 to October WTI.

Seasonal Strength

U.S. oil output expanded by 20,000 barrels a day to 9.43 million last week, the Energy Information Administration said Wednesday. Nationwide crude stockpiles have declined the past five weeks and fuel demand jumped by 21,000 barrels a day to 9.84 million last week, a record-high.

But as the summer driving season ends next month, the boost it has given to the oil market may fade.

“To really push above $50, we need to see signs that this isn’t seasonal strength in the market,” Gene McGillian, market research manager at Tradition Energy in Stamford, Connecticut, said.

Oil-market news:

  • The number of oil rigs in the U.S. dropped by one this week, to 765, according to Baker Hughes data.
  • U.S. crude exports averaged about 786,400 barrels a day in June, a six-month low, according to Bloomberg calculations of U.S. Census Bureau data released Friday.
  • Shale explorers from Pioneer Natural Resources Co. to Devon Energy Corp. are among drillers amassing hedges that protect their future proceeds as far out as 2023, according to data compiled by Bloomberg.
  • Russian oil giant Rosneft PJSC disclosed a $1.02 billion advance payment to Venezuela’s state producer after the U.S. sanctioned President Nicolas Maduro on Monday.