Oil weekly recap, March 31 – April 4

Both West Texas Intermediate and Brent crude benchmarks rose on Friday, buoyed by positive employment data from the US, but closed the week lower following indications of a jump in Libyan crude exports and softer demand prospects in China. Diplomatic tensions between Russia and the West kept the market underpinned.

On the New York Mercantile Exchange, WTI crude for delivery in May rose by 0.85% on Friday to $101.14 per barrel, having shifted in a daily range between days high and low of $100.28 and $101.63. The contract rose by 0.7% on Thursday but settled the five-day period 0.6% lower, the first decline in three weeks.

Meanwhile on the ICE, Brent futures for settlement in the same month added 0.54% on Friday to settle at $10.72 per barrel. Prices held in a daily range between $106.10 and $107.04. The European crude benchmark added 1.3% on Thursday, but couldnt offset its prior weekly losses and closed the week 1.3% lower. Brents premium to its US counterpart narrowed to $5.58 on Friday from Thursdays close at $5.86 on Thursday. The gap narrowed to $5.17 on Wednesday, the smallest since October 2nd.

Oil prices continued to recover on Friday from their previous weekly losses as US private job growth exceeded its pre-recession peak for the first time. Despite supporting Feds view to further cut its Quantitative Easing program, the data fanned positive sentiment for fuel demand in the worlds top consumer.

The Labor Department reported on Friday that private US employers added 192 000 jobs in March following an upward revised 188 000 jump in February. That raised the job count to 116.1 million, surpassing the January 2008 high of 116 million. Meanwhile, the unemployment rate held steady at 6.7%, albeit defying expectations for a drop to 6.6%, even as half a million of Americans entered the workforce.

Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut, said for Bloomberg: “This data shows that the U.S. economy is doing better, which bodes well for oil demand. We’re all keeping an eye on developments in Libya. If there’s a resolution and the oil starts to move, we could turn around and test the recent lows.”

According to data by the U.S. Commodity Futures Trading Commission, money-managers raised their net-long positions on WTI, or wagers that prices will rise, by 15 620 to 356 590 in the week ended April 1st.

Libya

A possible resumption of exports from vital eastern ports in Libya kept the market pressured. Rebels, who have blocked the terminals since last summer, said they agreed in principle with the government to allow a resumption, which could bring up back online a capacity of 600 000 bpd, compared to the country’s current output of around 150 000 bpd. Libya, holder of Africa’s biggest crude reserves, produced an average of 1.4 million bpd before protests and blockages began last summer.

However, uncertainty of whether the deal will come through limited movement to the downside. This is not the first time when rebels have said the shipments will resume and the government hasn’t confirmed the agreement in principle yet.

US inventories

The market was also pressured after a gauge of consumption in the US slid to the lowest in ten months. The Energy Information Administration reported that US refineries supplied 18.2 million barrels a day of fuel in the week ended March 28, the lowest since June.

Further losses however were capped after the government agency announced on Wednesday an unexpected decline in US crude oil inventories, the first in eleven weeks. The report showed that US crude inventories fell by 2.38 million barrels to 380.1 million in the seven days through March 28th, defying the median forecast of seven analysts surveyed by Bloomberg for a 2.5-million jump.

However, support to the upside was limited as analysts attributed the decline to a backlog of deliveries through the Houston Ship Channel, which was closed due to an oil spill.

Also weighing on oil, government data showed on Thursday that activity in China’s services sector grew at a slower pace in March. The National Bureau of Statistics’ Chinese Non-Manufacturing Purchasing Managers’ Index slid to 54.5 from 55.0 in February.

Meanwhile, a separate private report by HSBC and Markit Economics showed that services activity grew at the fastest pace in four months, but composite data registered an overall slowdown in the economy as output at manufacturers fell.

The HSBC China Services PMI registered at 51.9, up from 51.0 in February. However, the HSBC Composite Output Index posted at 49.3 in March from 49.8 in February, a second month of contraction and the sharpest since November 2011.

On Tuesday, the HSBC China Manufacturing PMI fell to 48.0, compared to analysts’ expectations for a drop to 48.1 from February’s reading of 48.5.

Simmering risks

Geopolitical uncertainty kept the market buoyed ahead of the weekend as Britain asked its European partners to continue with the preparation of economic sanctions against Russia as a large portion of Russian troops remained amassed near Moscows border to Ukraine.

Meanwhile, Russia almost doubled its gas price for Ukraine this week after a second hike on Thursday, pressuring the Ukrainian economy, which will rely on Western financial help to avoid bankruptcy.

According to a Bloomberg survey of analysts, West Texas Intermediate crude may fall next week as US crude oil inventories are expected to have risen in the seven days through April 4th. Eighteen out of 28 participants polled, or 64%, expected prices to decline in the week ended April 11th, while six were bullish and the remaining four were neutral.