- Oil Firm on Strong Economic Data, Supply Risks
Oil prices shot up nearly one per cent on Friday on bullish United States (U.S.) employment data that tempered fears about a decline in global crude demand and on expectations that an escalating conflict in Libya could tighten oil supplies.
Brent crude futures gained 49 cents to reach $69.89 a barrel having touched $70.03 in the previous session, its highest since Nov. 12.
U.S. West Texas Intermediate (WTI) crude climbed 54 cents to $62.64 a barrel, having hit their highest since Nov. 7 on Wednesday at $62.99.
Brent and WTI are on track for their second and fifth consecutive weeks of gains respectively.
“Oil prices are rallying in reaction to the U.S. employment report,” said John Kilduff, a partner at Again Capital LLC in New York. “Signs of global economic slowdown had been a headwind for oil prices, but this morning’s report seemed to dispel at least some of those concerns.”
The U.S. Labor Department report showed employment growth accelerated from a 17-month low in March as milder weather boosted hiring in sectors like construction.
Military action in Libya, which could disrupt supply from the Organisation of Petroleum Exporting Countries (OPEC) member, also supported prices.
Eastern Libyan commander Khalifa Haftar ordered his troops at the weekend to march on Tripoli, escalating a conflict with the internationally recognised government.
Crude futures also received a boost from news of a potential slowdown in crude production out of Venezuela, as U.S. sanctions and energy blackouts hit the OPEC nation’s oil industry.
Venezuelan state-owned oil company PDVSA expects its crucial crude upgraders to operate well below capacity this month, according to industry sources and documents seen by Reuters.
Venezuela depends on the upgraders, which are mostly operated by joint ventures with foreign companies, to convert the extra-heavy crude oil produced in the Orinoco Belt into exportable grades usable in overseas refineries.
The market is awaiting the latest data on the U.S. rig count at 1 p.m. – an indicator of future crude production.
After Texas pushed the United States over the last decade to become the world’s biggest oil producer last year, the heart of the shale revolution is starting to show fatigue.
Oil well productivity in Texas’s Permian basin – the country’s largest oil field – is falling, and the number of drilling rigs operating in the United States has declined for six straight weeks.