DTN Oil

WASHINGTON (DTN) -- Following a monster downside surprise on the U.S. labor market, crude and petroleum products futures on the New York Mercantile Exchange and Intercontinental Exchange settled Friday's session modestly higher. Energies were helped by a sagging U.S. dollar and rallying equities as investors raised their bets that Federal Reserve will keep interest rates near rock-bottom for longer as the economy heals from the pandemic.

On the session, NYMEX June West Texas Intermediate futures notched a 19-cent gain to settle at $64.90 barrel (bbl) and international benchmark Brent for July delivery settled at $68.28 bbl, also up 19 cents. Both contracts posted modest week-on-week gains.

NYMEX June RBOB jumped 1.32 cents or 0.75% to $2.1269 gallon and NYMEX June ULSD futures settled up 2.11 cents at $2.0106 gallon.

The U.S. Dollar Index plummeted to a two-month low 90.255 against a basket of foreign currencies in reaction to Friday's employment report showing the U.S. added a mere 266,000 new jobs in April compared with expectations for at least 1 million jobs created. What's worse, March's employment figures were revised lower by 146,000 from earlier estimates to 770,000. The unemployment rate rose to 6.1%, according to the Bureau of Labor Statistics. The jobs data is particularly disappointing in light of robust economic growth and trillions of dollars spent in government funding on various unemployment schemes and payouts.

Further details of the report showed the battered leisure and hospitality industry is still 2.9 million shy of workers it had prior to the pandemic, adding just 331,000 new jobs, while the manufacturing industry shed 18,000 jobs, mainly due to heavy losses in transportation equipment. Manufacturing itself is still down 515,000 jobs. Employment in the nonfarm economy is 8.2 million workers short of its February 2020 levels, before the effects of the coronavirus pandemic took hold.

Recent surveys on business activity from the Institute of Supply Management showed operators in manufacturing and service sectors alike struggle to meet surging demand amid acute labor shortages.

Markets, however, had only a mild reaction to the bad news, a sign that investors expect the Federal Reserve to keep its ultra-easy policies in place for a longer period of time. According to CME Fed's WatchTool, markets now see just a 7% chance of an increase in the federal funds rate by the end of the year, down from the 15% probability they were seeing a month ago. Federal Reserve officials have been expressing confidence in the recovery's pace recently but have stressed more challenges are ahead. The central bank has been holding short-term rates at a record low and buying $120 billion in bonds every month.

There are signs the pace of hiring is likely to continue into the summer, as new jobless claims last week fell below 500,000 for the first time since the early days of the pandemic.

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