Oil prices crept higher on Friday after data released by the US government showed strong job numbers and rising wages.  Anadarko photo.  

Oil prices up between 15-20 per cent since August

Oil prices rose slightly on Friday after US jobs data showed increases in employment as well as hourly earnings in September.

The market remains concerned about the looming Trump administration’s sanctions on Iranian crude exports which is expected to squeeze and already tightening global supply.

By 1:13 p.m., EDT, benchmark Brent crude was up 22 cents to $84.80/barrel and US West Texas Intermediate rose 56 cents to $74.89/barrel.  Both Brent and WTI are on track for a weekly gain of about 2 per cent.  The Canadian Crude Index fell $1.26 to $34.15.

According to the US Labor Department, average hourly earning climbed by 0.3 per cent in September and unemployment fell to near a 49-year low of 3.7 per cent.

“A strong economy, low unemployment would suggest the U.S. consumer is going to continue to fair well with higher energy prices,” Phil Flynn, an analyst at Price Futures Group told Reuters.

Oil prices eased slightly this week after Russia and Saudi Arabia announced they will increase their production to offset some losses from the US sanctions on Iranian crude exports which are set to begin on Nov. 4.

Despite the agreement to increase production from Moscow and the kingdom, oil prices remained near levels not seen since late 2014.  Oil prices have risen 15-20 per cent since mid-August.

The Trump administration is hoping Iran’s crude oil customers will buy oil from other suppliers and pressure Tehran to renegotiate the nuclear deal signed by former President Barack Obama and representatives from the United Kingdom, Russia, France, and China, Germany and the European Union.

Despite the threat from the Trump administration to any country caught doing business with Tehran on sanctioned items, India says it will continue to purchase oil from Iran.  Two industry sources told Reuters that India is expected to buy 9 million barrels of oil in November.

US bank Jefferies says along with India “it now appears that only China and Turkey may be willing to risk U.S. retaliation by transacting with Iran”.  Iranian crude exports could fall below 1 million barrels per day (b/d) in November, according to Jefferies.

Jefferies estimates there is enough crude oil to meet demand, but “global spare capacity is dwindling to the lowest level that we can document”.

Goldman Sachs argues that the rally may not last.  “While upside price risks will prevail for now, fundamental data outside of Iran has not turned bullish in our view,” Reuters reports Goldman said in a note to clients.

“We expect fundamentals to gradually become binding by early 2019 as new spare capacity comes online… pointing to the global market eventually returning into a modest surplus in early 2019.”