Oil Pares Second Weekly Gain Amid Signs Surplus Will Persist

  • Rigs seeking oil in U.S. fell by 13 to 662, Baker Hughes says
  • U.S. benchmark crude down more than 20% from June peak

Oil pared a second weekly advance after U.S. jobs data did little to change expectations for a September move by the Federal Reserve to raise interest rates amid signs a global crude surplus will persist.

Futures slipped 1.5 percent in New York. U.S. employers added 173,000 jobs in August and the jobless rate dropped to 5.1 percent, according to a U.S. Labor Department report -- the last major economic indicator before the Fed starts a two-day meeting on Sept. 16. The world’s crude surplus will last longer than predicted, Societe Generale SA said this week.

Oil has fluctuated after capping the biggest three-day rally in 25 years on Monday. Crude is still down more than 20 percent from this year’s closing peak in June as leading members of the Organization of Petroleum Exporting Countries sustain output and U.S. crude stockpiles remain almost 100 million barrels above the five-year seasonal average.

"There was a lot of volatility around the unemployment number and then we resumed the move lower," Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC, said by phone. "We’re in an oversupplied market and other than the unemployment number there’s not a lot going on today. After rising this week, a move lower makes sense."

West Texas Intermediate for October delivery fell 70 cents to settle at $46.05 a barrel on the New York Mercantile Exchange. Futures increased 1.8 percent this week.

Price Pact

Brent for October settlement decreased $1.07, or 2.1 percent, to end the session at $49.61 a barrel on the London-based ICE Futures Europe exchange. Prices slipped 0.9 percent this week. The European benchmark crude closed at a $3.56 premium to WTI.

Prices rebounded from the day’s lows after a report showed U.S. oil explorers returned to idling rigs this week after crude dropped a six-year low in August. Rigs targeting oil in the U.S. fell by 13 to 662, Baker Hughes Inc. said on its website Friday. The decline came after six weeks of increases.

Investor Anxiety

Investor anxiety remains heightened as the Fed prepares to raise rates with financial markets still rattled by concern slowing Chinese growth is spreading to Europe and America.

"We were expecting today’s data to provide clarity, but it hasn’t," Phil Flynn, senior market analyst for Price Futures Group Inc. in Chicago, said by phone. "The numbers are far from decisive."

OPEC member Venezuela and Russia, the largest oil exporter outside the group, reached an agreement on “initiatives” to bring stability to the market, Venezuelan President Nicolas Maduro said, according to Venezuela’s state-run news agency AVN. Russian President Vladimir Putin and his Venezuelan counterpart “have agreed on some initiatives that will be known when put in place, to achieve stability of the oil market,” Maduro said Thursday after a meeting in China.

Crude Stockpiles

Cutting output for a short-term price gain isn’t the cure for the “sickness’’ affecting global markets, Russian Energy Minister Alexander Novak told reporters in Vladivostok on Friday.

U.S. crude stockpiles expanded by 4.67 million barrels to 455.4 million through Aug. 28, according to an Energy Information Administration report on Wednesday. Output declined for a fourth week to 9.22 million barrels a day, the EIA said.

Still, “the world, whilst moderately oversupplied, is not awash in oil,” Andy Hall, one of the best-known oil traders who runs hedge fund firm Astenbeck Capital Management, said in a letter to investors. U.S. crude output through the remainder of 2015 will decline 6 percent from the first-half average, said Hall, who added that he expects to see a decline in production forecasts by the International Energy Agency.

Nineteen of 44 analysts and traders, or 43 percent, were bearish on WTI in a Bloomberg survey through Thursday. Thirteen respondents were neutral while 12 were bullish.  

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