DTN Oil

WASHINGTON (DTN) -- Bolstered by the risk-on sentiment in broader markets, oil futures on the New York Mercantile Exchange and the Intercontinental Exchange extended their recent gains into opening trade Friday, with all contracts on track for sharp weekly increase amid signs of tightening global supplies and improved macroeconomic data out of the United States where investors await the release of January non-farm payroll report for additional clues on economy's ongoing recovery.

The U.S. labor market is expected to regain between 50,000 and 70,000 jobs lost during the pandemic-induced recession, likely pushing the unemployment rate to about 6.7% in January. Reopening of large U.S. states and fiscal stimulus measures out of Washington, D.C. at the end of last year alleviated some pressures on the domestic labor market. Weekly unemployment claims have been falling for the past three weeks, with the number of Americans filing for ongoing benefits fell to the lowest since the beginning of the pandemic at 4.592 million. Private payroll provider, ADP reported this week US service industry resumed hiring last month, adding 156,000 new jobs after cutting 75,000 positions in a prior month. U.S. manufacturing, which represents about 12% of the economy, continued its recovery at the start of the year, with new factory orders increasing 1.1% last month, according to the data released Thursday by the Commerce Department.

Despite signs of improvement, Senate Democrats approved late Thursday budget procedures that will allow them to pass President Biden's $1.9 trillion stimulus bill without Republican support. The legislature includes fiscal aid to the states and local governments, funding for schools and testing facilities as well as $1,400 individual check to Americans making up to $75,000 per year.

Some economists argue that stimulus checks would target the wrong subset of the population that will use this money to pay off debt or put it into savings, meaning little impact on overall economic activity. Should the legislation pass through Congress, massive capital outflow from U.S. Treasury would be directed at individuals who already received a $600 stimulus check approved in $900 billion relief package late last year. In April 2020, $1,200 checks were sent to Americans in an early effort by the government to offset the impact of nationwide lockdown enacted to slow the spread of coronavirus pandemic.

In early trading, West Texas Intermediate futures for March delivery added 54cts to near $56.78 per barrel (bbl), while on track for nearly 9% gain this week. Prompt-month Brent futures on ICE advanced a steeper 61cts or nearly 1% overnight to $59.45 a bbl -- fresh 13-month high on the spot continuous chart. NYMEX March ULSD surged 2.63 cents or 1.53% to trade near $1.7266 gallon and the RBOB contact for March resumed the rally to trade near 1.6624 a gallon, up 1.76 cents from the previous session's settlement.

Oil futures have been trading in a steep backwardation this week -- a price pattern meaning traders are willing to pay hefty premiums to get hold of immediate supplies.

Liubov Georges can be reached at liubov.georges@dtn.com