Oil gained for the first time in six days, paring a weekly decline, after the U.S. jobless rate fell to the lowest level in three years.
Futures climbed 1.5 percent after the Labor Department said the unemployment rate dropped to 8.3 percent in January, the least since February 2009. Nonfarm payrolls increased 243,000, the most since April. Oil dropped this week as inventories rose and demand weakened.
“It’s a really strong jobs report and not surprisingly it should give the market a boost,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. “It showed that the U.S. economy is recovering.”
Crude for March delivery gained $1.48 to settle at $97.84 a barrel on the New York Mercantile Exchange. Prices fell 1.7 percent this week.
Brent oil for March settlement climbed $2.51, or 2.2 percent, to $114.58 a barrel on the ICE Futures Europe exchange. Brent’s premium to Nymex’s West Texas Intermediate widened for a seventh day, to $16.74.
The unemployment rate, derived from a survey of households, was forecast to hold at 8.5 percent, according to the median projection in a Bloomberg News survey of economists.
January’s payroll increase exceeded all the forecasts in the survey. The median projection called for an increase of 140,000. Estimates by the 89 respondents ranged from gains of 95,000 to 225,000.
The jump in employment was broad-based, including manufacturing, construction, temporary help agencies, restaurants and retailers.
“All of the markets exploded on the very bullish unemployment number,” said Tom Bentz, a director with BNP Paribas Prime Brokerage Inc. in New York. “Any sign of an improving U.S. economy is positive for the oil demand picture.”
Crude also moved higher after a Washington Post columnist reported yesterday that U.S. Defense Secretary Leon Panetta believes there is a strong likelihood that Israel will strike Iran by the end of June. Panetta declined to comment.
“The market found support overnight on the headlines that pointed to the possibility Israel will attack Iran this spring,” said Bentz.
Iran has said it may close the Strait of Hormuz, the transit point for about a fifth of global crude, after the European Union announced Jan. 23 that it will implement an oil embargo starting July 1 to pressure the Islamic republic over its nuclear program.
Iran’s Supreme Leader Ayatollah Ali Khamenei said his country will carry out its threats in response to Western sanctions aimed at stopped its nuclear program if needed, the state-run Mehr news agency reported today.
Nymex futures fell for the previous five days on signs of surging supply. Total inventories climbed to a 13-week high of 338.9 million barrels, and stockpiles at the Cushing (DOESCROK), Oklahoma, delivery point for the New York contract reached a six-week high of 30.1 million.
The current oil inventory level can support 23.4 days of refinery use, the most since July 1, according to the Energy Department.
“The inventory numbers are weighing on the market,” said Rich Ilczyszyn, chief market strategist and founder of Iitrader.com in Chicago. “I don’t want to say that we have a glut, but we do have plenty of stocks.”
The supply increase pushed the March contract’s discount to December to $2.69 based on today’s settlement prices, up from $1.38 on Jan. 27.
Rising Cushing inventories also helped widen Brent’s premium over WTI, which has almost doubled this year, said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. Enterprise Products Partners LP (EPD) plans to start shipping oil from Cushing to the U.S. Gulf Coast June 1 after the Seaway pipeline’s flow is reversed.
“Cushing stocks are increasing and there won’t be new pipelines until later this year,” McGillian said. He added that Asian demand is boosting Brent.
Crude prices may fall next week, a Bloomberg News survey showed. Fourteen of 34 analysts, or 41 percent, forecast oil will drop through Feb. 10. Twelve respondents, or 35 percent, predicted prices will increase and eight estimated there will be little change.
Total petroleum demand in the U.S., the biggest oil consumer, fell to 17.7 million barrels a day last week, the lowest level since May 1999, according to the Energy Department. Gasoline consumption decreased to 7.97 million barrels a day, the lowest level since September 2001.
Oil volume in electronic trading on the Nymex was 655,737 contracts as of 3:11 p.m. in New York. Volume totaled 745,272 yesterday, 27 percent above the three-month average. Open interest was 1.44 million contracts, a three-month high.
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