WTI futures hold near $100 on US economy outlook, cold weather

West Texas Intermediate crude held near the $100-mark after rising for four straight weeks, the longest rally since July, as Fridays jobs report showed unemployment in the US fell to the lowest level in more than five years, supporting oil on the demand side. Persisting cold weather continued to support the benchmark. However, recovering output in Libya, holder of Africas biggest crude reserves, and the prospects of increasing Iranian supplies weighed on the market.

On the New York Mercantile Exchange, WTI crude for delivery in March slid by 0.04% to $99.84 per barrel by 7:50 GMT, easing from a session high of $100.46, the strongest level since December 27. US crude rose by 2.1% on Friday, the most in two months, and settled at $99.88, the highest close since December 27, marking a fourth consecutive weekly advance.

Meanwhile on the ICE, Brent futures for delivery in the same month fell by 0.20% to $109.35 per barrel, having touched a daily high of $109.75, the highest since January 2nd. The European benchmark rose by 2.2% on Friday and settled the week 3% higher. Brent’s premium to its US counterpart widened to $9.69 a barrel on Friday, up from $9.35 on Thursday, based on closing prices.

US crude was well supported on Friday after the Labor Department’s job report indicated underlying economic strength in the world’s top consumer, despite a slow pace of job creation. The government agency reported that the US unemployment rate 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 non-farm payrolls standing at 113 000, compared to analysts expectations for a jump to 180 000 from December’s mere 75 000.

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.

Ric Spooner, a chief analyst at CMC Markets in Sydney, said, cited by Bloomberg: “The falling unemployment rate generally indicates the labor market is continuing on a path of improvement. The weaker jobs numbers will probably be seen to be a cold weather-related blip.”

According to data by the US Commodity Futures Trading Commission, money managers raised their net-long positions on WTI, or wagers that prices will jump, by 15 649 contracts, or 6%, to 275 931 in the week ended February 4th, the highest since September 17th.

Market players will be keeping a close eye on upcoming data from the US and China this week to further asses the economic outlook for the worlds two top oil consumers.

Inventories, supply

US crude also remained underpinned as recurring cold weather across most of the country stoked heating demand, draining the nations distillate fuel supplies. Also supportive on the supply side, refiners began shutting down for maintenance, introducing further tightening of petroleum products supply.

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. This was a fourth straight week of declines.

Crude inventories rose by 440 000 barrels to 358.1 million, 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. Total motor gasoline inventories rose by 0.5 million barrels to 235 million, beating the median projection of 10 analysts surveyed by Bloomberg for a 1.15-million increase.

CNBC reported last week 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, Britain’s Buzzard oilfield, its biggest, will undergo a total 9 weeks of maintenance this year, instead of the two weeks market players had expected.

Pressuring down the oil market, output at Libyas 340 000-bpd Sharara oilfield, the second largest, recovered to 327 000 bpd a day after protesters reopened a pipeline valve near Zintan, the state-run National Oil Corporation said. Nationwide output has expanded back to 600 000 bpd. However, the countrys eastern ports, which fell under control of rebel groups demanding greater share of Libyas oil wealth in the summer, remained closed, keeping a total of over 600 000-bpd capacity offline.

Also spurring global supply concern, Iran agreed to begin addressing doubts that it has been working on producing a nuclear weapon, the U.N. said on Sunday, showing another sign of its willingness to mend relations with the West.

Iran and the five permanent members of the U.N. Security Council and Germany are due to start a final round of talks on February 18th, aimed at reaching a definitive diplomatic accord on the Persian Gulf nations nuclear ambitions.