Oil Little Changed in Morning Trade

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures were little changed Friday morning, displaying no major reaction to the Labor Department's strong jobs report. The market now awaits rig count data that will indicate if the pace of drilling for oil in the United States continued to increase this week.

The payroll report showed 209,000 workers hired in July, beating an estimated 180,000, while the national unemployment rate dropped to a 4.3% 16-year low. Jobs data for the prior two months was revised up by 2,000, which suggests a strong economy that should support demand going forward.

Still, with only a month left before the summer peak demand season is over, investor sentiment has turned bearish amid increasing crude oil production domestically and globally. Analysts pointed to the news of Andy Hall shutting his hedge fund as evidence of the bearish sentiment among speculative players. He was one of the famously bullish traders.

The Energy Information Administration on Wednesday said domestic crude oil production rose to a 9.43 million bpd fresh two-year high during the week-ended July 28 at 970,000 bpd above a year ago. U.S. crude oil stocks are being drawn down but the pace of the global supply draw has been slow.

Media surveys earlier this week suggested the Organization of the Petroleum Exporting Countries in July missed compliance with their 15-month pact to reduce output by a combined 1.2 million bpd through March 2018, with 10 non-OPEC producers cutting of 558,000 bpd of their output.

Libyan production increased 180,000 bpd to 1.025 million bpd in July, the surveys showed, although Libya is exempt from the supply agreement and had telegraphed its intension to boost output.

Nigeria is now going to cap its output after last week's agreement with fellow OPEC members, but media reports said today that Africa's biggest oil producer raised its oil exports in July.

Traders were also keeping an eye on the U.S. dollar, which traded near a 15-month low this week before angling up this morning following the robust July payroll report.

In early trade, NYMEX September West Texas Intermediate crude futures were little changed at $49.05 bbl. The WTI contract has been under technical pressure after failing to hold above the psychologically important $50 bbl, remaining range-bound between Tuesday's (8/1) high of $50.43 bbl and the July 24 low of $45.40 bbl. The short-term trend is down with initial support at $48.44.

October Brent crude oil futures on the IntercontinentalExchange was also near flat at $52.02 bbl. NYMEX September ULSD futures were fractionally higher at $1.6411 gallon while the September RBOB futures contract gained 1.01cts to $1.6421 gallon.

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