Oil weekly recap, January 6 – January 10

West Texas Intermediate crude rose by the most in over a month after a report by the Labor Department showed the US economy created the least jobs in almost three years, easing concerns the Federal Reserve will further reduce its bond purchases at FOMCs upcoming meeting. North Sea supply disruptions, coupled with rising Chinese crude imports continued to support the oil complex, and mainly the Brent benchmark. However, another larger-than-expected build in US fuel supplies and domestic crude output reaching the highest in more than two decades limited gains.

On the New York Mercantile Exchange, WTI crude for delivery in February rose by 1.2% on Friday to settle at $92.72 per barrel, the largest daily gain since December 10th. Prices shifted in a daily range between $93.38 and $91.99 per barrel. The contract settled the week 1.3% lower after falling by 5.9% in the previous five-day period.

Meanwhile on the ICE, Brent futures for settlement in the same month jumped by 0.8% and settled at $107.25 per barrel after shifting in a daily range between $106.03 and $107.58 a barrel. Brents premium to its US counterpart narrowed to $14.53 from $14.73 a day earlier, based on closing prices.

US crude received short-term support on Friday after worse-than-expected employment data curbed fears the Federal Reserve might reduce further its monthly bond purchases at FOMCs upcoming meeting. The Department of Labor reported that US employers added 74 000 jobs in December, the least since January 2011, sharply underperforming expectations for a moderate retreat in job creation to 196 000 payrolls. Novembers reading received an upward revision to 241 000 from initially estimated at 203 000.

The unemployment rate fell to 6.7%, the lowest level since October 2008 as more people left the labor force. The participation rate slid to 62.8%, equaling Octobers reading as the lowest in more than three decades.

The downbeat data pressured down the US dollar, allowing raw materials priced in it to regain positions. The US dollar index, which measures the greenbacks performance against a basket of six major peers, fell by 0.4% to 80.75 on Friday. The March contract lost 0.2% in the previous day and settled the week 0.4% lower. Weakening of the greenback makes dollar-denominated commodities cheaper for foreign currency holders and boosts their appeal as an alternative investment.

Fed Chairman Ben Bernanke said on December 18th that the Fed will continue to probably do a measured reduction in the pace of purchases at each meeting. According to a Bloomberg News survey of economists conducted on December 19, policy makers will cut Fed’s stimulus in $10 billion increments over the next seven committee meetings.

Kyle Cooper, director of commodities research at IAF Advisors in Houston, said, cited by Bloomberg: “The Fed is probably not in any rush to tighten, and they’ll probably continue to have a very accommodative stand for quite some time. The China data showed that global oil demand is still strong. Crude had fallen $8 in the last few days and it’s just a little bit of a rebound.”

Chinese imports

Chinas National Bureau of Statistics reported that the countrys crude imports rose to 6.31 million barrels per day in December, up 13% from a year earlier and 10% higher than in November. On an annual basis, inbound shipments rose by 4% in 2013 from a year earlier.

However, continuing downbeat inventories data from the worlds top consumer kept a lid on gains. West Texas Intermediate fell to an eight-month low after the Energy Information Administration reported that domestic crude output rose by 24 000 barrels per day to 8.15 million last week, the most since September 1988, due to the US shale oil boom.

On Wednesday, the EIA said that motor gasoline inventories rose by 6.24 million barrels in the week ended January 3rd to 227 million, exceeding more than two times the median estimate of 10 analysts surveyed by Bloomberg for a 2.5 million increase. Distillate fuel supplies, including diesel and heating oil, jumped by 5.83 million barrels to 125 million, sharply exceeding projections for a 2.25 million build.

Total demand for refined products fell by 782 000 barrels per day to 18.2 million, the lowest level since June 9, further adding to negative sentiment.

US crude oil inventories fell by 2.68 million barrels to 357.9 million last week, a sixth consecutive weekly decline, and were near the upper limit of the average range for this time of the year. The reading came in line with analysts’ expectations for a draw of 2.75 million barrels. The drop in crude stocks however couldn’t offset the build in refined products as analysts saw it as a deliberate withdrawal to reduce taxes at year-end.

Data by the U.S. Commodity Futures Trading Commission showed on Friday that money managers reduced their net long futures and options positions on WTI in the week ended January 7th.

North Sea outage

Providing Brent with some support, a person familiar with the disruption said for Bloomberg that the 200 000-bpd Buzzard oilfield had stopped again on Friday, just a day after operations were restarted following a previous closure.

The contract however was pressured after reports that Russia and Iran were negotiating a swap that would allow the Persian Gulf nation to substantially increase its crude exports, avoiding Western sanctions on which a groundbreaking deal on curbing Irans nuclear program was founded late last year. Iran has the potential of adding more than 1 million barrels of oil per day to the global market.

Elliot Engel, the top Democrat on the House Foreign Affairs Committee, called the possible deal a “reckless and irresponsible move”. “Giving Tehran this type of sanctions relief severely undermines international efforts to force Iran to take seriously its international nuclear obligations,” he said.