WTI Crude Rises After U.S. Payrolls GainMark Shenk
West Texas Intermediate crude rose for a second day after U.S. employers added more workers than projected in February, bolstering optimism about the economy. The WTI-Brent spread narrowed.
Futures increased 1 percent in New York. Labor Department figures showed a 175,000 gain in employment. Analysts surveyed by Bloomberg projected a 149,000 advance. Futures dropped earlier this week as concern eased that Russia’s incursion into Ukraine’s Crimean peninsula would spark a broader conflict and disrupt energy shipments.
“The jobs number was much better than expected and as a result we’re going into the weekend on an up note,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “Attention has shifted to the economy for now. Crimea already seems like old news.”
WTI for April delivery advanced $1.02 to settle at $102.58 a barrel on the New York Mercantile Exchange. Prices fell 1 cent this week. The volume of all futures traded was 4.7 percent above the 100-day average at 3:30 p.m.
Brent for April settlement rose 90 cents, or 0.8 percent, to end the session at $109 a barrel on the London-based ICE Futures Europe exchange. Trading volume was 11 percent higher than the 100-day average. The European benchmark closed at a $6.42 premium to WTI, down from $6.54 yesterday.
Bloomberg survey estimates of 92 economists for February payrolls ranged from gains of 100,000 to 220,000.
Unemployment rose to 6.7 percent from 6.6 percent as more people entered the labor force and couldn’t find work, the data released today in Washington showed. The unemployment rate was forecast to hold at 6.6 percent in February. The department’s survey of households showed an increase in people entering the labor force, while few of them were able to find work.
German industrial output increased in January for a third consecutive month as mild temperatures boosted construction activity, a report from the Economy Ministry in Berlin showed.
“The jobless figures are a positive reflection of economic strength and energy demand going forward,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “It’s nice to be moving higher on an economic development and not a geopolitical crisis.”
U.S. President Barack Obama signed an order authorizing financial sanctions against Russia, while European Union leaders halted trade and visa talks and threatened punitive economic measures in what’s become the worst rift between Russia and the West since the Cold War era. Russia is the world’s largest energy exporter.
“There’s still lots of worries about what will play out over in the Crimea, about supply constraints,” said Gene McGillian an analyst and broker at Tradition Energy in Stamford, Connecticut. “The jobs report was also better than expected. The downward correction is over.”
The flow of Russian crude through Ukraine to Europe via the southern branch of the Druzhba oil pipeline is uninterrupted, Natalya Kutsik, a spokeswoman for Russia’s oil pipeline operator OAO Transneft, said by text message. The link carried about 300,000 barrels a day last year, according to data from Ukraine’s energy ministry.
WTI has traded in a range of more than $5 this week and reached a five-month high of $105.22 a barrel on March 3.
“We’re pretty close to where we started the week but have seen a lot of volatility,” said Tim Evans, an energy analyst at Citi Futures in New York. “Prices surged on Monday because of the action in Crimea and then dropped in the middle of the week. There’s been a lot of movement but we’ve not moved to new territory, which makes sense given that it’s impossible to know how the situation will work out.”
U.S. crude supplies rose by 1.43 million barrels last week to 363.8 million, the highest level since December, according to an Energy Information Administration report on March 5.
Stockpiles at Cushing, Oklahoma, the delivery point for the WTI contract, fell 2.66 million barrels in the seven days ended Feb. 28 to a two-year low of 32.1 million, EIA data show. The opening in January of the southern link of TransCanada Corp.’s Keystone XL pipeline to the Texas Gulf Coast from Cushing eased a bottleneck at the hub.
“U.S. inventories are another element of tension in the market,” Evans said. “Nationwide crude supplies have increased while those in Cushing have declined. It’s hard to know what to weigh more heavily.”
Rigs targeting oil in the U.S. jumped to the highest level since Baker Hughes Inc. separated the oil and gas rig count in 1987, the Houston-based company’s weekly report showed today. Oil rigs rose 13 to 1,443, data posted on the website the Houston-based field services company showed.
WTI also found technical strength after touching an almost-three-week low of $100.13 yesterday, said Dominick Chirichella, senior partner at the Energy Management Institute in New York.
“The technical trade started yesterday when it hit the psychological level of near $100,” Chirichella said.
Investors added a net $43.3 million yesterday to U.S.- listed exchange-traded funds that invest in energy, equivalent to 1.2 percent of total assets, data compiled by Bloomberg show. They added $10.9 million to the United States Oil Fund, the biggest oil ETF.
Implied volatility for at-the-money WTI options expiring in April was 19 percent, down from 19.3 percent yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 476,346 contracts at 3:30 p.m. It totaled 710,168 contracts yesterday, 42 percent higher than the three-month average. Open interest was 1.7 million contracts, the highest level since Nov. 13.