Oil weekly recap, December 2 – December 6

West Texas Intermediate crude rose for a sixth consecutive day on Friday, the longest winning streak in 3-1/2 months, and posted its best weekly performance since early July after upbeat GDP and employment data from the US sparked hopes for robust economic recovery, boosting demand prospects in the worlds top consumer. A weekly EIA report showing US crude inventories fell last week and snapped 10 straight weekly builds continued to support the market. Gains however remained limited as the better-than-expected economic data fueled speculations among some analysts the Federal Reserve might reduce its monthly bond purchases at FOMCs December 17-18 meeting.

On the New York Mercantile Exchange, WTI crude for delivery in January rose by 0.40% to $97.77 per barrel on Friday, the longest streak of daily gains in 3-1/2 months. Prices surged to a five-week high of $98.05 minutes after the release of the employment data, while days low was touched at $97.08. The US benchmark settled the week 5.4% higher, marking the best weekly performance since the beginning of July.

Meanwhile on the ICE, Brent crude futures for settlement in January rose by 0.66% on Friday and settled at $111.71 a barrel. Prices held in a daily range between $112.06 and $110.95. The European benchmark rose on Friday after falling for two days and closed the week 1.4% higher. Brents premium to its US counterpart was $13.94 yesterday after slipping to $13.60 on Thursday, the lowest since November 19 based on closing prices.

The oil market drew support after much-better-than-expected economic data from the US boosted demand prospects in the world’s No1 consumer. The Labor Department reported that unemployment in the U.S. fell to 7.0% in November, the lowest in five years, beating projections for a minor decline to 7.2% from Octobers 7.3%.

U.S. employers added more jobs last month than projected. Non-farm payrolls jumped to 203 000, confounding expectations for a retreat to 183 000 from Octobers downward revised 200 000. The progress in the labor market will probably provide a spark for the US economy, analysts expected.

The recovering labor market led to improving sentiment and higher spending, despite a 0.1% decline in household income. Household spending, which accounts for 70% of the economy, rose by 0.3% in October, beating both projections and last months increase of 0.2%.

US average hourly earnings increased to 0.2% in November from the previous month to reach $24.15, a 2% yearly increase. Average weekly hours for all workers also increased, from 34.4 in October to 34.5 in November.

Core personal consumption expenditures (PCE) met analysts projections on both monthly and annual basis, jumping by 0.1% and 1.1% in October, respectively.

Russell Price, senior economist at Ameriprise Financial Inc. in Detroit, said for Bloomberg before the report: “People are feeling better, that’s a positive for the holiday season. This year I don’t see the same strong fiscal headwinds ahead of us to impede our momentum.”

Backing Prices statement, a flash reading showed consumer confidence in the U.S. increased more than expected in December, hitting the highest level in five months. The preliminary Thomson Reuters/University of Michigan Consumer Sentiment index posted at 82.5 this month, up from 75.1 in October and sharply exceeding projections for a minor improvement to 76.0. The strong confidence was largely based on gains in employment, stock market and property values, offsetting Octobers 16-day federal government shutdown.

This comes after the US Commerce Department reported on Thursday the nation’s preliminary Gross Domestic Product grew at a 3.6% annualized rate in the third quarter, up from the initial estimate of 2.8% and the strongest since Q1 of 2012, beating analysts’ projections for a 3.1% expansion. According to the report, US growth was mainly driven by the largest increase in inventories since early 1998. Inventories increased at a $116.5 billion annualized pace in Q3, compared to $86 billion rate the preceding quarter.

A separate report provided by the Labor Department showed that the number of people who filed for initial unemployment benefits sharply dropped in the week ended November 30. Initial Jobless Claims declined to 298 000 last week, compared to an upward revised 321 000 claims in the preceding week, confounding analysts’ expectations for a jump to 325 000.

Oils gains however remained limited as the upbeat data aroused speculations among some analysts that the Federal Reserve might surprisingly decide to pare its quantitative easing program at FOMCs December 17-18 meeting. The committees October meeting minutes pointed that Federal Reserve officials may reduce their $85 billion in monthly bond purchases “in coming months” as the economy improves.

However, broad expectations called for sustained stimulus until next year. A survey conducted by Bloomberg last month revealed that the Fed will probably trim its asset purchases to $70 billion from $85 billion at its March 18-19th meeting.

Fed Reserve Bank of Atlanta President Dennis Lockhart said yesterday, cited by Bloomberg that any decision to taper should be accompanied by a limit on the size of the program or a timetable for ending it.

Inventories data

Oil prices continued to draw support after the Energy Information Administration said earlier in the week that US crude supplies declined for the first time in 11 weeks in the seven days to November 29. Stockpiles fell by 5.6 million barrels in the seven days through November 29 to 385.8 million, exceeding more than ten times the median estimate of analysts surveyed by Bloomberg.

Supplies at Cushing, Oklahoma, the biggest US storage hub and delivery point for NYMEX-traded contracts, fell by 18 000 barrels to 40.6 million, the first drop in eight weeks.

The report also showed that refinery utilization picked up in the seven days to November 29, suggesting supplies will most likely decline further in the upcoming weeks. Refineries operated at 92.4% of their operable capacity, up from 89.4% a week earlier, and exceeded analysts’ expectations. Gasoline production fell last week, while distillate fuel output increased, averaging 9.0 and 5.1 million barrels per day, respectively.

Also fanning positive sentiment, TransCanada Corp. said on Thursday that the Gulf Coast segment of its Keystone pipeline, which will connect Cushing, Oklahoma, the biggest US storage hub, and Port Arthur, Texas, will become operational by mid-January. The company said earlier in the week it expected to bring the extension online on January 3, which shot oil prices up.

Both benchmarks were further aided as North Sea producers moved staff from some platforms and cut production as hurricane-force storm Xaver moved towards mainland Europe on Thursday after meteorologists warned this could be the worst storm the continent has seen in years.

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