Oil weekly recap, February 3 – February 7

West Texas Intermediate crude rose for a fourth day on Friday and settled the week higher after a government report showed unemployment in the US fell to the lowest in more than 5 years while cold weather drained the nations distillate stockpiles. Expectations for tight fuel supplies as refiners begin to shut down for maintenance and extended maintenance at Britains largest oilfield further supported the market.

On the New York Mercantile Exchange, WTI crude for settlement in March rose by 2.09% on Friday to settle at $99.88 per barrel, the highest since December 27th. Prices surged above the $100 mark for the first time this year, hitting a day high of $100.24, while days low stood at $97.13. The US benchmark rose in four out of five days this week, settling 2.5% higher on a weekly basis.

Meanwhile on the ICE, Brent futures for delivery in the same month surged by 2.2% to $109.57 per barrel, the highest since January 2nd. Prices varied in a daily range between $109.74 and $106.88 a barrel. The European benchmark rose by 0.9% on Thursday and settled the week 3% higher. Brents premium to its US counterpart widened to $9.69 a barrel, up from $9.35 on Thursday, based on closing prices.

The oil market drew support on Friday after the Labor Departments job report indicated underlying economic strength in the worlds top consumer, despite a slow pace of job creation. The government agency reported that the unemployment rate in the US slid to 6.6% in January, the lowest since October 2008, even though more people entered the labor force. US employers created less jobs in January than expected, likely because of the freezing cold weather across most of the country, with the US non-farm payrolls standing at 113 000, compared to analysts expectations for a jump to 180 000 from Decembers mere 75 000.

Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said, cited by Bloomberg: “The initial reaction was to move lower but the market quickly turned its back on the disappointing payrolls total. The 6.6 unemployment rate is positive and a sign of underlying economic strength. The equity markets and other risk assets are already moving higher on it.”

The Labor Department reported a day earlier that the number of people who filed for initial unemployment benefits fell to 331 000 in the week ended February 1st, outpacing projections for a drop to 335 000. The preceding period’s reading received an upward revision to 351 000 from initially estimated at 348 000.

Inventories

The oil market drew support throughout the week as persisting cold weather across most of the US drained the nations distillate fuel supplies and as refineries began to shut down for maintenance, tightening supply of refined products.

The Energy Information Administration reported on Wednesday that distillate supplies, which include diesel and heating oil, fell by 2.36 million barrels to 113.8 million in the week ended January 31st, slightly less than analysts’s projections for a 2.5-million drop, and remained well below the lower limit of the average range for this time of the year. This was a fourth consecutive weekly drop.

The EIA also reported that the nation’s crude oil inventories rose by 440 000 barrels to 358.1 million last week, outperforming analysts’ expectations for an increase of 2.55 million barrels. This was in line with a private report by the industry-funded American Petroleum Institute that showed a build of 384 000 barrels.

Stockpiles at Cushing, Oklahoma, the biggest US storage hub and delivery point for NYMEX-traded contracts, dropped by 1.55 million barrels to 40.3 million after TransCanada’s Keystone XL pipeline began carrying oil from Cushing to the Gulf Coast.

Total motor gasoline inventories rose by 0.5 million barrels last week to 235 million, beating the median projection of 10 analysts surveyed by Bloomberg for a 1.15-million increase.

According to a weekly Bloomberg survey of analysts, WTI may decline next week amid lower demand for crude as refineries shut down for maintenance. Nineteen out of 37 participants polled, or 51%, wagered that prices will fall through February 14th, while ten predicted an increase and eight remained neutral.

However, those losses may be offset by strong demand for petroleum products. CNBC reported that Citgo Petroleum Corp began closing down both of its plants in Corpus Christi, Texas, on Wednesday and Motiva Enterprises LLC began maintenance at its refinery in Convent, Louisiana, on Thursday.

Meanwhile, European refiners are also cutting processing runs, further tightening supplies of petroleum products. Also giving prices a lift, Britains Buzzard oilfield, its biggest, will undergo a total 9 weeks of maintenance this year, instead of the two weeks market players had expected.

North Sea crude output is expected to drop in March, aiding the Brent benchmark. Loading of the Brent, Forties, Oseberg and Ekofisk streams is expected to average 890 000 barrels per day, down from 1.03 million bpd in February.