Crude Oil Climbs as U.S. Payroll Data Boosts Economic Outlook

Updated on

Oil increased in New York after a rebound in U.S. payrolls boosted optimism the economy is accelerating.

Futures rose 0.8 percent after Labor Department data showed employment picked up in April, a sign companies are gaining confidence. Oil explorers reduced the number of active rigs in U.S. fields for the 22nd straight week, extending an unprecedented drop in drilling.

Oil has rebounded almost 40 percent from a six-year low reached in March as drillers idled rigs targeting oil in the U.S. to the fewest since September 2010. While the nation’s crude output slowed last week, supplies are more than 100 million barrels above the five-year average for this time of year.

“The employment data is providing some support after a string of negative news,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone. “Changes to payrolls have a measurable impact on energy demand, especially gasoline.”

West Texas Intermediate for June delivery rose 45 cents to settle at $59.39 a barrel on the New York Mercantile Exchange. Prices, which increased 0.4 percent this week, are down 41 percent from a year ago.

Brent Slips

Brent for June settlement declined 15 cents to end the session at $65.39 a barrel on the London-based ICE Futures Europe exchange. The contract dropped 1.6 percent this week. The European benchmark crude closed at a $6 premium to WTI.

The unemployment rate in the country fell to 5.4 percent in April, the lowest since May 2008, with payrolls increasing 223,000, the government figures showed.

Rigs targeting oil in the U.S. dropped by 11 to 668, Baker Hughes Inc. said on its website Friday.

Prices slipped earlier on speculation that a glut will persist as U.S. producers prepare to boost drilling. EOG Resources Inc. said Tuesday it plans to boost drilling as soon as prices stabilize at about $65 a barrel, while other shale-oil companies lifted their production outlook.

For more, read this QuickTake: Oil Prices

Shale-oil explorer Pioneer Natural Resources Co. has said it’s preparing to deploy more rigs as early as July, while Carrizo Oil & Gas Inc., Devon Energy Corp. and Chesapeake Energy Corp. this week raised their full-year production outlook.

Spending Outlook

“The market is forward looking,” Mike Wittner, head of oil research at Societe Generale SA in New York, said by phone. “Focus will shift to the next step, which is the likelihood that spending and drilling will increase again.”

U.S. crude inventories slid to 487 million barrels last week, the EIA said Wednesday. Supplies remain near the highest level since 1930, based on monthly records dating back to 1920. Stockpiles of gasoline and distillate fuel, a category that includes diesel and heating oil, rose last week while refineries increased operating rates, the report showed.

U.S. crude production decreased by 4,000 barrels a day to 9.369 million. Output reached 9.42 million barrels a day in the week ended March 20, the most in more than three decades.

Rig Count

“There’s no evidence that the lower rig count will lead to a collapse in production,” Kyle Cooper, director of commodities research at IAF Advisors in Houston, said by phone. “The number of rigs might rise soon.”

In China, crude imports climbed to 30.29 million metric tons last month, preliminary data released by the General Administration of Customs in Beijing showed. That’s equivalent to 7.4 million barrels a day, the most on record. The Asian nation is the world’s biggest oil consumer after the U.S.

“We don’t lack for potential bullish stories today,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by phone. “The employment data here was good and the Chinese import numbers were impressive.”

Iranian Capacity

Oil will probably advance to $80 a barrel by the end of next year as U.S. supply slows, Roknoddin Javadi, Iran’s deputy oil minister, said Thursday at a news conference in Tehran. Current prices are unsustainable, said Javadi, who is also the managing director of state-run National Iranian Oil Co.

Iran could increase output within 10 days if economic sanctions are removed, Oil Minister Bijan Namdar Zanganeh said Wednesday. Iran, the fifth-biggest producer in the Organization of Petroleum Exporting Countries, pumped 2.78 million barrels a day in April, data compiled by Bloomberg showed. Output would rise to 3.8 million a day within six months and 4 million in less than a year if sanctions were removed, Zanganeh said.