Oil Rises From Three-Week Low as U.S. Hiring Exceeds Forecasts

Oil rebounded from the lowest close in almost three weeks in New York as payrolls climbed more than forecast in July in the U.S., the world’s largest consumer of crude.

Futures rose as much as 1.5 percent, trimming a second weekly decline. U.S. payrolls increased 163,000, Labor Department figures showed today in Washington. The median estimate of 89 economists surveyed by Bloomberg News called for a gain of 100,000. Tropical Storm Ernesto moved into the eastern Caribbean, the U.S. National Hurricane Center said. Oil fell 2 percent yesterday after the European Central Bank failed to assure investors it was ready to take immediate steps to support the economy.

“Oil markets are getting a bit tighter, and demand should be picking up,” said Hannes Loacker, an analyst at Raiffeisen Bank International AG in Vienna, who predicts prices in London will struggle to pass $110 a barrel. “Without doubt, the U.S. recovery and the Chinese economy are the two most important factors on the demand side, more so than Europe.”

Crude for September delivery increased as much as $1.28 to $88.41 a barrel in electronic trading on the New York Mercantile Exchange and was at $88.11 at 1:55 p.m. London time. The contract yesterday fell $1.78 to $87.13, the lowest close since July 13. Prices are 2.2 percent lower this week and down 11 percent this year.

Brent crude for September settlement gained 74 cents, or 0.7 percent, to $106.64 a barrel on the London-based ICE Futures Europe exchange. The European benchmark’s premium to New York-traded West Texas Intermediate was at $18.53, after closing yesterday at $18.77, the most since May 16.

Brent-WTI Spread

The European benchmark’s premium to New York-traded West Texas Intermediate was at $18.33, after closing yesterday at $18.77, the most since May 16.

The “compelling reason for the widening spread” is Brent’s strength rather than WTI’s weakness, according to JBC Energy GmbH. A drop in the output of North Sea Brent crude stemming from maintenance work at the Buzzard oil field is boosting the differential, the Vienna-based researcher said in a report today. Previous surges in the spread were caused by a build-up of inventories in the U.S., JBC said.

Crude shipments from Iran, the third-largest producer in the Organization of the Petroleum Exporting Countries, have plunged by 1.2 million barrels a day, or 52 percent, since the latest sanctions aimed at dissuading the country’s nuclear program began July 1, according to data compiled by Bloomberg.

Catherine Ashton, the European Union foreign-policy chief, spoke with Iran’s top nuclear negotiator and failed to set a specific date for the next round of talks aimed at pressuring the country to give up elements of its nuclear program. The two officials agreed to talk again “after further reflection at the end of the month,” according to an e-mailed statement yesterday from Ashton’s office.

Nigeria Production

Crude oil output in Nigeria, Africa’s biggest producer, reached an “all-time high” after security improved in the southern oil-producing Niger River delta region, Andrew Yakubu, group managing director of the Nigerian National Petroleum Corp., said by e-mail. Total production rose yesterday to 2.7 million barrels a day from 2.4 million barrels, he said.

Oil in New York has technical resistance around $90 a barrel, along a downward-sloping trend line on the daily chart going back three months, according to data compiled by Bloomberg. Price advances the past two weeks have stalled near this line. Sell orders tend to be clustered near chart-resistance levels.

“Near term, market attention will next shift to the last of the week’s event risks, namely U.S. non-farm payrolls,” Mark Pervan, the head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in a note today.

Storm Track

Ernesto, the fifth named weather system of the Atlantic season, moved past St. Lucia into the eastern Caribbean, the National Hurricane Center said. Ernesto is packing winds of 45 miles (75 kilometers) per hour, the center said in an 8 a.m. Atlantic time advisory. The storm is 40 miles west-southwest of St. Lucia moving west at 24 mph. The government of Barbados discontinued a tropical storm warning for the islands, as did Trinidad for Grenada.

It’s too early to say if the storm’s track will lead it into the Gulf of Mexico. The Gulf is home to 6.5 percent of U.S. natural gas output, 29 percent of oil production and 40 percent of refining capacity, according to the Energy Department. In June, Tropical Storm Debby’s threat to the Gulf pushed New York natural gas futures to a one-month high as about 35 percent of the region’s output was shut.

Analysts and traders surveyed by Bloomberg News were split over the direction of oil prices next week after central banks failed to bolster stimulus and Tropical Storm Ernesto developed. Thirteen of 33 forecasters, or 39 percent, estimated crude will drop through Aug. 10. Another 13 respondents predicted that futures will increase and seven said there will be little change.

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