NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled higher Friday afternoon, rallying ahead of the Labor Day weekend on comments from Russian President Vladimir Putin in support of a production freeze and what has been dubbed a "goldilocks" U.S. payroll report that makes it unlikely the Federal Reserve will raise the federal funds rate this month.
"The jobs report supported not only the oil market but also the equities market because a September rate hike is unlikely now, but also the market was oversold after four days of losses for the crude market," said Tom Bentz, head of energy derivatives clearing at ABN AMRO.
The Labor Department reported 151,000 jobs were created last month, falling short of an expected 180,000, while the unemployment rate held steady at 4.9%. The dollar briefly reversed lower after the jobs report was released, falling to a one-week low as the odds of a rate hike this year fell sharply. However, the dollar has since reversed higher this afternoon. The dollar and oil have an inverse trading relationship.
Bentz said fundamentals continue to drive the oil market in the short term and "the bigger picture is the market is oversupplied, although it's slowly rebalancing."
On Aug. 8, the Organization of Petroleum Exporting Countries announced it would hold informal talks on how to stabilize oil prices alongside an International Energy Forum set for Sept. 26-28 in Algeria. Since then, oil prices have risen sharply, but this week have reversed down on doubt OPEC would agree to freeze output.
In the past two days, both Russian Energy Minister Alexander Novak, the lead negotiator with OPEC, and Saudi Arabian Energy Minister Khalid al-Falih have wavered, suggesting there is no need to freeze output since crude oil prices have been trading near $50 bbl.
Today, Putin told Bloomberg News he would like Russia and OPEC to reach a deal to freeze output and he expects the dispute over Iran's participation in the freeze to be resolved. The comments were considered bullish.
A survey showed OPEC oil production rose to 33.5 million bpd in August from 33.46 million bpd in July, with Saudi Arabian output said to have risen as high as 10.90 million bpd last month from July's 10.67 million bpd.
At settlement, NYMEX October West Texas Intermediate crude futures rallied $1.28 to $44.44 bbl while down $3.20 or 6.7% for the week. The November Brent contract on the IntercontinentalExchange rose $1.38 to $46.83 bbl while the spot-month contract is down $3.09 or 6.2% for the week.
In products trade, the NYMEX October ULSD futures contract settled 2.77cts higher at $1.4096 gallon, while nearest delivery futures are down 8.76cts or 5.9% for the week. The NYMEX October RBOB futures contract surged 2.92cts to 1.3016 gallon at settlement, although spot-month RBOB futures are down a steep 21.12cts or 14% with the forward roll to October delivery following Wednesday's expiration of the September contract.
Domestically, oil services firm Baker Hughes on Friday reported the number of active oil rigs rose by one to 407 during the week-ended today. On Wednesday, the Energy Information Administration showed domestic crude inventories were 15.5% higher year-over-year as of the week-ended Aug. 26.
Demand is expected to ease after Labor Day, but Bentz said Hurricane Hermine could impact product deliveries to the East Coast this weekend.
George Orwel can be reached at email@example.com
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