Oil Futures Seesaw Ahead of Rigs Data

NEW YORK (DTN) -- Spot-month New York Mercantile Exchange oil futures seesawed within a narrow range in early trade Friday as a bullish U.S. payroll report weighed against concern over recent strong growth in domestic oil production.

At last glance, NYMEX March West Texas Intermediate futures were up 10 cents to $53.64 per barrel (bbl) and ICE April Brent crude futures edged up 7 cents to $56.63 bbl. NYMEX March ULSD futures gained 0.29 cent to $1.6547 gallon and March RBOB futures eased 0.70 cent to $1.5259 gallon.

The futures complex rose in the immediate aftermath of a payroll report by the Bureau of Labor Statistics showing 227,000 new jobs were added to the U.S. economy last month versus a 175,000 estimate, while the unemployment rate ticked up to 4.8%.

January's job growth was the best since June, and follows the addition of 156,000 jobs in December, although hourly earnings eased 0.2% to 2.5% year-over-year. The report suggests the U.S. economy is on sound footing, which would support fuel demand, analysts said.

However, the oil market remains cautious in front of Baker Hughes Inc.'s weekly report to be released early afternoon that could show another increase in the number of rigs drilling for oil in the United States. Last week's report showed active oil rigs increased by 15 to 566, the most in over a year, while the Energy Information Administration reported midweek that U.S. crude oil production eased to 8.915 million barrels per day (bpd) remained near an 8.961 million bpd 10-month high.

"The market is nervous because we are waiting or Baker Hughes report and pulled back because we've seen rising rig count in recent weeks," said analyst Phil Flynn at Price Futures in Chicago.

EIA data also showed total petroleum stocks rose by 5.3 million bbl last week while total products supplied over the last four-week period averaged over 19.3 million bpd, down 1.9% year-over-year, with the building inventory a drag on oil futures.

Globally, the market is finding support in potential geopolitical risks stirred by comments and actions by President Donald Trump and evidence the Organization of the Petroleum Exporting Countries has, according to reports, enacted 82% to 88% of the 1.2 million bpd planned cuts in production.

Trump has had what are described as frank phone calls with leaders of Mexico and Australia in recent days and today warned Iran and North Korea could pay a price if they don't stop causing problems.

"Trump told Iran that nothing is off the table, so people are watching Iran and that's adding a risk premium [to the price of oil]," Flynn said.

George Orwel can be reached at george.orwel@dtn.com