Oil prices climbed on Friday on strong US jobs data and tightening crude supply due to US sanctions on Venezuelan oil exports. OPEC cuts are also impacting the global crude market. Repsol photo.
Oil prices rise over 3 per cent Friday
Upbeat US jobs data, US sanctions on Venezuelan crude imports, a falling US rig count along with OPEC supply cuts helped boost oil prices over3 per cent on Friday.
By 4:19 p.m., EST, benchmark Brent crude futures were up over 3 per cent or $1.96 to $62.80/barrel and are on track for a weekly gain of about 2 per cent. US West Texas Intermediate futures climbed $1.51 to $55.30/barrel. WTI is expected to post a 3.1 per cent gain this week.
According to Reuters, oil prices were buoyed after strong US job growth boosted demand for equities. As well, Baker Hughes reported on Friday that the US oil rig count was down by 15 to 847. The rig count fell the most in a month since April 2016.
Surprising strong US job growth boosted Wall Street, propping up oil prices.
This week, the Trump administration imposed sanctions on Venezuelan crude exports, stranding takers in ports.
“We are beginning to see the impact to crude supplies from the sanctions on Venezuela. It has driven up domestic crude prices, cutting into refiner margins,” Andrew Lipow, president of Lipow Oil Associates told Reuters.
“That, combined with Saudi cuts and Libyan production declines has changed market sentiment as we appear to be moving towards a better balanced supply situation.”
With heavy crude prices rising and imports falling as a result of the sanctions, some US refiners are cutting their crude processing. Market sources told Reuters that gasoline margins fell to their lowest in nearly a decade.
OPEC along with some of its allies are reducing their output in an effort to rebalance the oil market. In January, Saudi Arabia cut its production by 350,000 barrels per day (b/d), according to a Reuters survey. Participants in the cartel’s production cut are expected to reduce their production by a total of 1.2 million b/d.
Late Thursday, President Donald Trump tweeted that he and Chinese President Xi Jinping will meet soon to try to resolve the trade war. However, in a later tweet, Trump warned he could postpone the talks if preliminary talks do not yield a deal.
Chinese state news agency Xinhua reported that China’s trade delegation said the most recent round of talks with US officials made “important progress”.
“Many traders recognize that sense is likely to prevail and a deal will be struck after the summit – although the shape of any deal will continue to drive a jittery market,” Cantor Fitzgerald Europe said in a note.
China’s economic growth has slowed. A survey showed the country’s factory activity contracted by the most in almost three years in January. This boosted fears about falling fuel demand in China.
Analysts see the oil market returning to balance in 2019 as the OPEC+ cuts take hold.