Oil remains near 14-month high ahead of U.S. jobless data

WTI prices were little changed in the early European session on Friday and traded near Wednesdays 14-month high closing price. Market players are expecting positive readings of todays U.S. jobless data, which would boost demand amid improving economic performance. This weeks unexpectedly large drop in crude oil inventories also supported prices.

On the New York Mercantile Exchange, WTI crude for August delivery traded at $101.11 per barrel at 6:57 GMT, down 0.13% after closing at $101.24 a barrel on July 3. Prices ranged between daily high and low of $101.58 and $100.91 per barrel respectively. Light, sweet crude is on track for the biggest weekly gain since April, having advanced more than 4.7% so far during the past four days after settling 2.73% higher last week.

Meanwhile on the ICE Futures Exchange, Brent oil for August delivery stood at $105.61 a barrel, down 0.06% at 6:57 GMT. Prices ranged between days high and low of $105.62 and $105.39 respectively. The European benchmark settled lower yesterday for the first time this week on easing concern over Egypts political tension after President Mursi was ousted. However, Brent is still marking the biggest weekly gain since the first week of June, having gained more than 3.5% during the past 4 days after it settled 1.07% higher last week.

Michael McCarthy, chief market strategist at CMC Global Markets in Sydney said for Reuters: “Tonight will be a good test of the residual interest in oil. Oil should rise because of the broader economic performance. With technical support and stronger fundamentals, there is no reason to be selling oil.”

Oil prices drew support this week as jobless data on Wednesday gave some positive preliminary information prior to todays Unemployment Rate and Non-Farm Payrolls indicators. Prices were also supported as a much higher than anticipated drop in crude oil inventories boosted demand prospects. Political turmoil in Egypt threatened a 2.24 million barrels per day oil flow through the Suez Canal, which is controlled by the African country.

Investors are looking ahead into today’s key Unemployment Rate and Change in Non-Farm Payrolls indicators, which will provide further information on the pace the U.S. economy is recovering at. Preliminary estimates suggest a 0.1% fall in the Unemployment Rate, 7.5% down from 7.6%. Change in Non-Farm Payrolls are expected to stand at 165 000, down from 175 000 in May. Positive U.S. economic data is key to oil pricing as the country is the biggest consumer in the world, having accounted for 21% of global consumption in 2012. If expectations are met or even exceeded, WTI will most probably settle the week above $100 per barrel for the first time since April 2012.

Ken Hasegawa, an energy-trading manager at Newedge Group in Tokyo said for Bloomberg: “Oil demand will grow gradually in the second half thanks to some rebound in economies, especially in the U.S. But there is no shortage of oil, therefore upside will be limited.”

Oil reserves dropped

Oil drew support by a surprisingly large drop in oil reserves in the U.S. this week. In its weekly oil reserves report on Wednesday, the EIA said that Crude Oil Inventories dropped by 10.3 million barrels to 383.8 million as of the week ending June 28. Refineries operated at 92.2% of their capacity last week. Gasoline production increased, while distillate fuel output decreased.

Gasoline stockpiles fell by 1.7 million barrels, refuting forecasts. Distillate fuel inventories also outperformed projections, decreasing by 2.4 million barrels, whereas expectations were for a gain.

According to a Bloomberg survey, EIA’s report should have shown a 2.25 million barrels drop in crude oil reserves. Gasoline stockpiles were expected to have risen by 700 000 barrels and distillate fuel inventories were supposed to have gained 1 million barrels.

This was generally in line with the American Petroleum Institutes separate report on Tuesday, according to which crude reserves dropped by 9.4 million barrels. Gasoline stockpiles fell by 183 000 and distillate-fuel inventories dropped by 2.3 million.

Political unrest

Oil prices reached a 14-month high of $102.16 this week as political turmoil in Egypt threatened to disturb the 2.24 million barrels per day oil flow through the Suez Canal, which is controlled by the African country. Egypts army supported mass protests and forced President Mohamed Mursi from power one year after his election. Adly Mansour was selected to replace Mursi as a military-appointed interim president. This eased concern over oil supply, after which Brent settled lower on Thursday for the first time this week.

BNP Paribas analysts said: “We do not expect the political situation, even in flux, to undermine oil supply or transit in Egypt.” Operations at the Suez Canal and the Suez-Mediterranean Pipeline were not affected by the conflicts.