West Texas Intermediate crude surged to the highest level in a month as U.S. employment rose more than forecast in April, stoking speculation that demand in the world’s biggest oil-consuming country will increase.
Prices capped a second weekly advance after the Labor Department said nonfarm payrolls grew by 165,000 workers last month. Economists surveyed by Bloomberg had expected a 140,000 gain. The jobless rate unexpectedly declined to a four-year low of 7.5 percent. Crude also climbed as U.S. stocks rallied.
“The oil market has broken out and the jobs report is the biggest catalyst,” said Jeff Grossman, president of New York-based BRG Brokerage and a New York Mercantile Exchange floor trader. “The stock market is strong and everything is going higher.”
WTI for June delivery jumped $1.62, or 1.7 percent, to $95.61 a barrel on the Nymex, the highest settlement level since April 2. The volume of all futures traded was 32 percent above the 100-day average for the time of day. Prices are up 2.8 percent this week.
Crude extended gains after the front-month WTI contract broke above $95.19, the 76.4 percent retracement level on a three-month Fibonacci chart.
Brent for June settlement advanced $1.34, or 1.3 percent, to $104.19 a barrel on the London-based ICE Futures Europe exchange. Volume was 36 percent above the 100-day average.
Brent’s premium to WTI dropped to $8.58, the narrowest based on settlement prices since Dec. 30, 2011.
The Labor Department revised the March gain to 138,000 from the 88,000 estimated last month. Private payrolls, which don’t include jobs at government agencies, increased by 176,000 in April after a revised gain of 154,000 the previous month.
“The jobs report is inspiring and it’s bullish for oil,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “With jobs numbers being strong, you just can’t be short on oil. The market is going to be looking to better demand in the U.S.”
The April jobless rate dropped to the lowest level since December 2008 from 7.6 percent in March. The rate, which is derived from a separate poll of households, was forecast to hold at 7.6 percent, according to the Bloomberg survey median.
“The jobs report seems to be what is driving most of the markets higher today,” said Chris Barber, a senior analyst at Energy Security Analysis Inc. in Wakefield, Massachusetts. “It provides a more optimistic economic outlook and, for oil, a better demand outlook.”
The Dow Jones Industrial Average gained as much as 1.2 percent as it reached 15,000 for the first time. The Standard & Poor’s 500 Index rallied as much as 1.3 percent.
The U.S. used 18.8 million barrels a day of oil in 2011, or 21 percent of the world’s consumption, according to BP Plc’s Statistical Review of World Energy.
“People had been a bit nervous about oil demand and economic growth,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “This report gives people a sense that maybe the U.S. economy will not pause, but instead may accelerate in the second quarter.”
Total oil demand in the U.S. fell 3.6 percent last week to 17.9 million barrels a day, the Energy Information Administration reported May 1.
Crude inventories gained 6.7 million barrels to 395.3 million, the highest level in 82 years, according to the EIA, the Energy Department’s statistical arm.
“U.S. oil inventories are very high and demand is still poor,” Flynn said. “With this improvement in the jobs number, there is an expectation that demand is going to perk up.”
WTI may drop next week, a Bloomberg survey showed. Sixteen of 34 analysts and traders, or 47 percent, forecast futures will decline through May 10. Twelve respondents, or 35 percent, projected a gain and six said there would be little change.
Implied volatility for at-the-money WTI options expiring in June was 22.3 percent, compared with yesterday’s 23.2 percent, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 619,906 contracts as of 3:12 p.m. It totaled 638,298 contracts yesterday, 9.5 percent above the three-month average. Open interest was 1.76 million contracts.