Published On : 05/02/2024

Oil edges back towards 7-week low after resilient US jobs data

By Robert Harvey and Deep Kaushik Vakil

LONDON (Reuters) -Oil edged back towards the previous day’s seven-week low on Thursday, paring earlier gains, after U.S. data pointed to persistent labour market strength and further dimmed prospects of an early decline in U.S. interest rates.

Brent crude futures for July were up 40 cents, or 0.5%, at $83.84 a barrel by 1332 GMT, heaving earlier touched a session peak of $84.44. U.S. West Texas Intermediate (WTI) crude for June was 27 cents, or 0.3%, firmer at $79.27, off a high for the day of $79.90.

Data showed U.S. jobless claims held steady at lower levels last week as the labour market remains fairly tight, ahead of April’s employment report due to be published on Friday.

On Wednesday, prices fell more than 3% to a seven-week low after the U.S. Federal Reserve kept interest rates steady and warned of stubborn inflation, which could curtail economic growth this year and limit oil demand increases.

Crude was also pressured by data from the Energy Information Administration (EIA) showing an unexpected increase in U.S. crude inventories, which were at their highest since June. [EIA/S]

While OPEC and its allies have yet to begin formal talks on extending voluntary oil output cuts beyond June, three sources from OPEC+ producers said such an extension could be agreed if demand fails to pick up.

Underpinning oil’s recovery was the potential for lower prices to spur the U.S. government to replenish strategic reserves.

“The oil market was supported by speculation that if WTI falls below $79, the U.S. will move to build up its strategic reserves,” said Hiroyuki Kikukawa, president of NS Trading.

In the Middle East meanwhile, expectations grew that a ceasefire agreement between Israel and Hamas could be in sight after a renewed push led by Egypt, even as Israeli Prime Minister Benjamin Netanyahu has vowed to proceed with a long-promised assault on the southern Gaza city of Rafah.

“The geopolitical temperature might have dropped a notch or two, but the climate remains hot,” said PVM analyst Tamas Varga.

(Reporting by Robert Harvey in London, Deep Vakil in Bengaluru, Mohi Narayan in New Delhi and Yuka Obayashi in Tokyo; Editing by David Goodman and Jan Harvey)

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