West Texas Intermediate crude surged above $100 a barrel for the first time this year after weaker-than-forecast jobs growth triggered debate about the outlook for Federal Reserve stimulus.
Futures rose the most in two months, advancing with major stock indexes. The Labor Department said payrolls gained 113,000 in January, less than the 180,000 median estimate in a Bloomberg survey of economists. Hiring may have been slowed by the coldest January in two decades. The Federal Reserve studies employment data to determine the timing and pace of reductions in bond purchases meant to boost the economy.
“Oil and equities are both up because the disappointing jobs number raises the prospect that the Fed will stop tapering and might even reverse what’s already been done,” said Kyle Cooper, director of commodities research at IAF Advisors in Houston. “The moves today have been dramatic. It will be interesting to see what happens next week.”
WTI for March delivery advanced $2.04, or 2.1 percent, to $99.88 a barrel on the New York Mercantile Exchange, the highest settlement since Dec. 27. Futures reached $100.21 after the close of floor trading. The volume of all futures traded was 16 percent above the 100-day average at 2:59 p.m. The contract rose 2.5 percent this week, capping a fourth consecutive gain.
Brent for March settlement increased $2.38, or 2.2 percent, to end the session at $109.57 a barrel on the ICE Futures Europe exchange, the highest close since Dec. 31. Trading was 26 percent above the 100-day average. The European benchmark closed at a $9.69 premium to WTI, up from $9.35 yesterday.
The central bank said last week that it will press on with a second reduction to its monthly bond buying, by $10 billion to $65 billion, citing an improvement in the labor market.
The Standard & Poor’s 500 Index rose 1.2 percent and the Dow Jones Industrial Average increased 0.9 percent.
The unemployment rate fell to 6.6 percent, the lowest level since October 2008, even as more Americans entered the labor force, department data showed. Retailers and government agencies reduced payrolls, while construction firms and manufacturers boosted employment.
“The 6.6 unemployment rate is positive and a sign of underlying economic strength,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York.
Last month was the coldest January since 1994 in the contiguous U.S. states, based on gas-weighted heating-degree days, according to Commodity Weather Group LLC.
“The poor payroll data is being looked at as a weather-related anomaly,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “The weather in January was at least as bad as December, which would hurt hiring, so people are writing off the headline number.”
Diesel and gasoline futures surged on speculation seasonal refinery maintenance will tighten inventories. Stockpiles of distillate fuel, a category that includes heating oil and diesel, dropped 2.36 million barrels to 113.8 million last week, the Energy Information Administration reported on Feb. 5. Supplies in the Mid-Atlantic States tumbled 14 percent to 13.6 million in the week ended Jan. 31, the lowest since May 2003.
Refineries often idle units at the start of the year after preparing for the heating season in November and December.
Ultra low sulfur diesel for March delivery rose 5.52 cents, or 1.8 percent, to close at $3.0503 a gallon in New York. Gasoline futures for March delivery climbed 6.59 cents, or 2.5 percent, to settle at $2.7489 a gallon.
“The products are very strong, which is pulling up crude,” said Stephen Schork, president of Schork Group Inc., a consulting group in Villanova, Pennsylvania. “We have very low supplies of diesel, especially along the East Coast. The planned refinery shutdowns will further tighten things.”
WTI will probably fall next week, according to a Bloomberg survey. Nineteen of 37 analysts, or 51 percent, forecast futures will decrease through Feb. 14. Ten respondents estimated prices will climb, and eight said there will be little change.
Brent crude also gained as Libya’s oil output declined after protesters tampered with a pipeline. Brent, which is used to price more than half of the world’s crude and, unlike WTI, can be exported, is often more sensitive to changes in the global supply-and-demand balance.
Libyan production ranged from 450,000 to 500,000 barrels a day, down from 600,000 barrels last week, Nuri Berruien, the chairman of National Oil Corp., said yesterday. Protesters demanding money “tampered” with a valve on a pipeline in the northwestern Zintan region, causing output to drop at the Sharara field further south.
Implied volatility for at-the-money WTI options expiring in April was 17.2 percent, down from 18.1 percent yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 527,544 contracts at 3:01 p.m. It totaled 522,693 contracts yesterday, 3.3 percent above than the three-month average. Open interest was 1.6 million contracts.