Crude Futures Flat; Equities Rally

WASHINGTON (DTN) -- Oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange moved in narrow ranges on Thursday, as traders turned their focus from cooling U.S.-Iranian tensions to market fundamentals and U.S. employment data due for release Friday morning for fresh clues on economic growth and fuel demand.

U.S. equities rallied on Thursday, with all major indexes resetting their record highs ahead of the monthly release of U.S. employment figures at 8:30 a.m. EST Friday. Markets mostly expect a solid but slower payroll growth rate in December with a consensus that 158,000 new jobs were added by the U.S. economy last month after a much higher-than-expected 266,000 increase in November. Manufacturing payrolls, however, are estimated to have declined by 1,000, while the unemployment rate is seen to have remained steady at a 3.5% 50-year low. Yet, U.S. jobs report may just surprise the markets to the upside after private payroll provider ADP showed a better-than-expected 202,000 jobs were added last month.

The U.S. dollar surged to a 97.275 two-week high in afternoon index trade, weighing on West Texas Intermediate futures that fell to an intraday low of $58.66 barrel (bbl) -- the lowest trade since the first week of December. At settlement, NYMEX February WTI futures were down $0.05 at $59.56 bbl, and ICE March Brent futures moved off a $64.56 three-week spot low to end the session slightly lower at $65.37 bbl. NYMEX February ULSD futures eased 0.81 cents to $1.9501 gallon settlement and the front-month RBOB contract moved up 0.39 cents to $1.6527 gallon.

Thursday's lackluster session came despite news China confirmed it will sign a preliminary trade deal with the United States early next week and that the Organization of the Petroleum Exporting Countries seemingly achieved compliance with new production quotas a month ahead of schedule. S&P Platts survey found crude output from the 13-member cartel declined by 100,000 bpd in December to 29.55 million barrels per day (bpd), driven by steep curbs from Saudi Arabia and better compliance from laggard members Nigeria and Iraq.

The 10 members with quotas under the accord, which exempt Iran, Libya, and Venezuela, produced 25.06 million bpd in December, making good on their new collective ceiling of 25.15 million bpd. Saudi Arabia, OPEC's largest producer, pared its production in December to 9.82 million bpd, far below the kingdom's new quota of 10.14 million bpd. Saudi Energy Minister Prince Abdulaziz bin Salman has pledged to hold the kingdom's output at around 9.74 million bpd in 2020, as long as other members respect their quotas.

Despite some bullish headlines, oil markets took a breather after a rollercoaster session Wednesday that sent WTI futures tumbling 5%. As geopolitical tensions ease, analysts warn that elevated concerns over security in the fragile region are expected to haunt markets in the coming weeks and months.

On Thursday, Canadian officials said they are confident an Iranian missile downed The Ukrainian International Airlines plane that crashed near Tehran, killing all 176 people on board. Canada's Prime Minister Justin Trudeau called for a thorough investigation of the incident. Iran has so far denied a missile strike by its air defenses. Unidentified reports also indicated several bombs exploded in the Green Zone in Baghdad, which hosts international embassies and the U.S. military.

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

(CZ)

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