DTN Oil

WASHINGTON (DTN) -- West Texas Intermediate futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange advanced on Friday after the U.S. employment report showed a much larger-than-expected increase in new jobs for the month of September, underscoring a still resilient economy.

The U.S. labor market added 336,000 new jobs in September, almost twice the expected number of 160,000. Within the sectors of the economy, leisure and hospitality gained 96,000 jobs, government added 73,000, and professional scientific services grew by 29,000.

The sharp increase in employment during the final month of the third quarter offers evidence that the labor market remains too hot to bring inflation down to the Federal Reserve's 2% target. Federal Reserve officials believe to lower inflation, the U.S. economy can add no more than 75,000 to 100,000 jobs a month. Anything more than that could exacerbate the most acute labor shortage in decades that drive wages up and make it harder for the U.S. central bank to get inflation under control.

The oil complex has come under increased selling pressure from the headwinds of several bearish factors, including a souring outlook for the U.S. economy and exceptionally weak fuel demand.

Wednesday's inventory report from the Energy Information Administration showed an outsized 6.5 million bbl build in domestic gasoline inventories as demand dropped to the second-lowest weekly rate of the year during the final week of September. While the weekly data point offers a trading opportunity, traders look at the four-week average to smooth out weekly demand volatility to better gauge the physical market's disposition. However, even four-week figures showed gasoline consumption remained exceptionally weak against pre-pandemic levels, down by 10% from 2019 and some 5% below the year-ago level.

Gasoline demand slid even the below depressed levels of the 2020 pandemic year. The fresh data underscores the adverse impact of higher gasoline prices on aggregate demand in an overwise slowing economy. Average gasoline prices in the U.S. hovered near $3.90 gallon in September, according to the American Automobile Association, just below $4 gallon that is considered by many economists to be the breaking point for many American families.

Investment bank JP Morgan in a research note on Wednesday said, "demand destruction has begun as summer driving season came to a close." This, in turn, should lead to the end of global stock draws, depressing the oil prices into year's end. JP Morgan downgraded its oil price forecast to $86 bbl for November and December.

At settlement, West Texas Intermediate November futures on the New York Mercantile Exchange added $0.46 gallon to $82.79 bbl, and international crude benchmark advanced to $84.58 bbl. NYMEX November ULSD futures added $0.0321 to $2.9008 gallon, and front-month RBOB futures firmed $0.0032 to $2.1922 gallon.

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