West Texas Intermediate crude rose to a 14-month high after the U.S. reported adding more jobs than forecast in June, boosting economic optimism, and on concern that unrest in Egypt will escalate.
Futures capped the biggest weekly gain in more than two years as the Labor Department said payrolls advanced by 195,000 workers, exceeding the 165,000 forecast in a Bloomberg survey. Egyptian security forces clashed with supporters of deposed President Mohamed Mursi in Cairo as protests broke out following his ouster by the army. Brent oil in London increased more than WTI on a report that North Sea exports will fall next month.
“We’re gaining strength on the better-than-expected payroll number because that should translate into higher fuel demand,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “The protests continue in Egypt and raise a number of risks. It would be hard to go home short this weekend with the continuing unrest.”
WTI oil for August delivery rose $1.98, or 2 percent, to $103.22 a barrel on the New York Mercantile Exchange, the highest settlement since May 2, 2012. The volume of all futures traded was 8.8 percent above the 100-day average for this time of day. There was no floor trading yesterday because of the U.S. Independence Day holiday and all electronic transactions were booked today for settlement purposes.
The 6.9 percent weekly gain for the U.S. benchmark crude was the largest since February 2011.
Brent crude for August settlement advanced $2.18, or 2.1 percent, to end the session at $107.72 a barrel on the London-based ICE Futures Europe exchange. It was the highest close since April 2. Volume for all contracts was 30 percent higher than the 100-day average. The spread with WTI was $4.50.
Shipments of the four most important North Sea crude grades will drop 11 percent in August, according to loading programs obtained by Bloomberg News. Exports of Brent, Forties, Oseberg and Ekofisk, which make up the Dated Brent benchmark, will be 754,839 barrels a day next month, compared with 851,613 barrels in July.
“We are certainly seeing high volumes today,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “This shows that there’s some bullish conviction behind the move.”
The U.S. jobless rate stayed at 7.6 percent last month, while hourly earnings in the year ended in June advanced by the most since July 2011, according to the Labor Department.
U.S. equities also extended their weekly advance on the employment figures. The Standard & Poor’s 500 Index rose 0.8 percent and the Dow Jones Industrial Average gained 0.9 percent.
WTI surged above $100 a barrel this week as political upheaval in Egypt heightened concern that unrest in the most populous Arab country will spread and disrupt oil shipments from the Middle East.
Egypt’s army forced Mursi from power a year after his election. A military-appointed interim president, Adly Mansour, was sworn in. The White House and most leaders in Congress have so far avoided describing the transition as a “coup,” which could cost Egypt more than $1.5 billion a year in military and humanitarian aid under U.S. law.
Egypt didn’t declare a state of emergency in the South Sinai and Suez provinces, denying a report the al Ahram newspaper that was carried by Reuters, the wire service said.
Egypt controls the Suez Canal and the Suez-Mediterranean Pipeline, through which a combined 2.24 million barrels a day of oil was shipped from the Red Sea to Europe and North America in 2011, according to the U.S. Energy Information Administration. The waterway remained open today with 28 vessels transiting from the north and 17 from the south, the Suez Canal Authority said.
“There might have been some initial excitement about the events in Egypt but it’s important to remember that a coup is never a good thing,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion. “At least half of the population voted for the Islamists and are not at all pleased with what’s taken place.”
Goldman Sachs Group Inc. maintained its three-month forecast for Brent at $105 a barrel, saying there hasn’t been a supply disruption reported in Egypt. Still, the options market has turned “short-term bullish,” Jeffrey Currie, a New York-based analyst at the bank, said in a report e-mailed today.
The Dollar Index climbed to the highest level since 2010 as the U.S. jobs report fueling bets the Federal Reserve will begin slowing monetary stimulus. The U.S. currency was also up after European Central Bank President Mario Draghi pledged yesterday to keep interest rates at a record low for an “extended period.”
A stronger dollar reduces the appeal of commodities as an investment. Gold, silver and copper futures in New York were down more than 3 percent.
Crude is “meeting the bull market definition of reacting to bullish news and ignoring bearish news,” said Tim Evans, an Energy analyst at Citi Futures Perspective in New York. “We’re becoming progressively overvalued.”
Implied volatility for at-the-money WTI options expiring in August was 23.8 percent, up from 23.8 percent July 3, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 559,615 contracts as of 2:56 p.m. It totaled 1.08 million contracts July 3, the most since Feb. 7, 2012. Open interest was 1.76 million contracts.
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