Oil Futures Rally: Jobs Up, Rigs Slip

WASHINGTON (DTN) -- Crude and product futures on the New York Mercantile Exchange and Intercontinental Exchange settled sharply higher on the first day of November, with the U.S. crude benchmark spiking 3.7% after Friday's better-than-expected jobs report and declining number of active oil rigs eased concern that slowing economic growth would lead to an oversupplied market.

NYMEX December West Texas Intermediate futures spiked $2.02 to a $56.20 barrel (bbl) settlement, erasing most of the weekly declines on Friday. ICE January Brent contract ended up $2.07 at a $61.69 bbl one-week high settlement on the continuous spot chart.

Products rallied more than 3% in value on the session. NYMEX December ULSD futures increased 5.73 cents to $1.9331 gallon and NYMEX December RBOB futures spiked 6.11 cents to $1.6557 gallon.

Oil futures across-the-board gains Friday were partly spurred by a surprisingly bullish jobs report released by U.S. Bureau of Labor Statistics showing nonfarm employment in the United States rose by 128,000 in October. Markets mostly expected job gains of around 89,000 last month due to a prolonged strike by the United Auto Workers at General Motors facilities.

The stronger-than-expected report also detailed substantial upward revisions in U.S. employment gains for the two previous months, with August job growth adjusted up 51,000 to 219,000 and September revised 44,000 higher to 180,000. Job gains averaged 176,000 over the previous three months. The U.S. unemployment rate ticked up 0.1% from a 50-year low to 3.6% in October, which was expected.

The blowout job report eased market fears that slowing economic growth would weaken demand for fuel, sending oil prices sharply higher on Friday.

Oil futures were also aided by a continued decline in the U.S. oil rig count Friday afternoon, down five to a new 30-month low at 691 this week, with 22 rigs taken out of service in the fourth quarter. Still, despite a well-established downtrend in the rig count, U.S. production remained at a record high 12.6 million barrels per day (bpd) for the entire month of October, according to Energy Information Administration. Markets will closely monitor figures in next week's supply report for clues on the direction in crude production.

Oil futures began the session on the offensive after overnight data from China showed manufacturing index unexpectedly advanced 0.3 points to 51.7 in October, surpassing market calls for a 51 reading. In the United States, however, manufacturing activity was reported Friday at 48.3 in October, below market expectations of 49.3, but above September's 47.8 -- the lowest in nearly a decade.

In U.S.-China trade news, President Donald Trump suggested the bilateral trade deal will likely have two or three phases, while both countries inched closer to signing a "phase one" of a comprehensive agreement. Oil markets were mostly under pressure this week amid reports China is casting doubt on achieving a long-term trade deal with the United States.

Liubov Georges can be reached at liubov.georges@dtn.com

(CZ)