Oil Rallies After Robust Jobs Report

NEW YORK (DTN) -- New York Mercantile Exchange (NYMEX) spot-month oil futures rallied Friday morning as easing tensions in the Korean peninsula and a robust jobs report in the United States fueled risk-on trade, although the upside remain capped by higher domestic crude production.

The Bureau of Labor Statistics showed 313,000 jobs created in February, which surpassed an expected 205,000 while January figures were revised up by 15,000 to 239,000. The U.S. unemployment rate held steady at 4.1% although hourly earnings were up a less-than-expected 0.15%, which means concern over inflation has been dialed back. Labor participation rate edged up to 63%.

This report bodes well for the broader U.S. economy and for oil demand going forward, said analysts.

On Wall Street, the Dow Jones Industrial Average spiked more than 150 points while S&P 500 Index rose to more than 15 points after the jobs report was released, having since eased, while the U.S. dollar index rose to a 1 1/2-week high.

The jobs report boosted investor confidence as it follows Thursday's announcement on tariffs on steel and aluminum, although the "flexible" tariffs were watered down from initial expectations, including exemptions for Canada and Mexico.

Meantime, oil and equity investors were pushing geopolitical risks to the back burner amid a thaw in relations between the U.S. and North Korea following the announcement late Thursday of a planned May meeting between President Donald Trump and North Korean leader Kim Jong Un.

Still, analysts cautioned the oil rebound may be temporary because the continued increase in U.S. crude oil production remains a bearish factor, with the market awaiting Baker Hughes' weekly rig count report is due out at 1 p.m. ET.

Earlier this week, the Energy Information Administration (EIA) released two reports showing U.S. crude oil production increased by 86,000 barresl per day (bpd) last week to a 10.369 million bpd record high, and the output is projected to increase at a 1.4 million bpd year-on-year rate to 10.7 million bpd in 2018 and 11.3 million bpd in 2019.

At 9 a.m. ET, NYMEX April West Texas Intermediate (WTI) crude oil futures climbed 46 cents to $60.58 per barrel (bbl), off a $60.90 session high. May Brent on the Intercontinental Exchange surged 62 cents to $64.23 bbl and the Brent premium to WTI rose to a $3.68 better than one-week high.

NYMEX April ULSD futures gained 1.11 cents to $1.8702 gallon, while April RBOB futures edged up 0.98 cents to $1.8775 gallon.

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