Oil Futures Stagger to Mixed Close

NEW YORK (DTN) -- New York Mercantile Exchange oil futures ended mixed this afternoon with crude reversing lower while the RBOB and ULSD contracts trimmed gains after Baker Hughes reported the number of rigs drilling for oil in the United States increased for the first time this year, adding to concerns over a supply overhang.

Earlier in the day, the oil futures complex rallied after the dollar angled lower versus the euro as the Bureau of Labor Statistics reported fewer jobs added in June than the market expected.

The Greek debt crisis remains a dark cloud hanging over Europe's economic outlook, but the latest poll showing Greek voters may endorse a bailout plan proposed by the country's creditors at a referendum scheduled for Sunday, July 5, spurred some optimism.

"The petroleum markets are staging a moderate price recovery in the wake of Wednesday's drop, supported by a weaker U.S. dollar after U.S. employment data for June was somewhat weaker than anticipated," said Tim Evans at Citi Futures. "The quick read from the market is there is still enough progress in the labor market to allow the Federal Reserve to raise interest rates later this year, but the timing could slide from September to December for the first bump."

Evans said the gains for oil futures were limited by rising production from OPEC, while a recovery in production in the United States and Libya may add to this supply surplus in the months ahead.

At settlement, the NYMEX August West Texas Intermediate crude contract was little changed, down 3 cents to $56.93 per barrel (bbl) while up 30 cents for the week. The contract earlier posted a one-month spot low of $56.65, and has since slipped to a $56.56 low.

ICE August Brent crude futures contract was also little changed, settling up 6 cents at $62.07 bbl, while posting a $1.19 loss for the week. The Brent premium over WTI expanded 9 cents to $5.14 bbl at the close.

In products trade, the NYMEX August ULSD contract nudged 0.06 cents higher at a $1.8399 gallon settlement while down 2.29 cents for the week. The NYMEX August RBOB contract climbed 2.75 cents to a $2.0343 gallon settlement, down 1.42 cents for the week.

On Wall Street, U.S. equities reversed lower and the dollar eased against its main rivals including the euro after the disappointing payroll report showed fewer-than-expected jobs were created and there was no wage growth while the unemployment rate fell to a seven-year low because fewer people were looking for work.

The BLS report showed the economy created 223,000 new private-sector jobs in June, while the readings for April and May were revised lower by a combined 60,000. The national unemployment rate fell to 5.3%, the lowest since April 2008, from 5.5% for May and below a 5.4% consensus estimate. The jobless rate decline was due to the fact that many people stopped looking for work, with the rate of labor participation at 62.6%, the lowest since 1977, down from 62.9% for May.

The report showed wage growth, a key economic indicator the Fed is looking when considering whether to raise the federal funds rate, was near flat, with the hourly earnings rate at 2.0%, down from 2.3% for May.

The report suggests a moderate pace of U.S. economic growth as the Federal Reserve continues to look for evidence to support a hike in the federal funds rate. A weak report would bolster the case for delaying a Fed rate hike.

The market was less active today, with many traders leaving early ahead of Independence Day celebrations on July 4. Markets will be closed Friday.

The market was skittish because of the standoff between Greece and its euro-zone creditors. Euro-zone leaders have said a vote against their proposal in the July 5 referendum means Greece would leave the euro. The outcome of the vote remains uncertain.

On supply, Baker Hughes reported this afternoon that the number of oil rigs in the United States rose for the first time since December 2014. The report said the total U.S. rig count increased by three to 862 during the week-ended today, with rigs in operation down 1,012 versus a year ago. Of that total, 640 rigs were drilling from oil this week compared with 628 week prior.

On Wednesday, the Energy Information Administration reported crude oil stocks rose 2.4 million bbl build last week, with gasoline stocks down 1.8 million bbl while distillate fuel stocks rose by 392,000 bbl. Gasoline demand was up 76,000 barrels per day (bpd) to 9.731 million bpd while distillate implied demand soared 296,000 bpd to 3.904 million bpd for the week.

George Orwel george.orwel@dtn.com