Oil Futures Chase Equities Higher as USD Falls to 3-Week Low

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange shifted higher in morning trading Thursday, lifting front-month West Texas Intermediate futures above $69 per barrel (bbl) after stronger-than-expected reading on U.S. unemployment claims for the final week of August raised optimism that last month's jobs report scheduled for a Friday release could show an accelerated pace of recovery in the labor market.

U.S. unemployment claims dropped to a new pandemic-era low of 340,000 during the last full week of August, down 14,000 from the previous week's revised level, the Labor Department said on Thursday. The four-week moving average of claims, which smooths week-to-week volatility, fell to 355,000, also a pandemic low. Unemployment claims have been trending lower after briefly exceeding 400,000 mid-July. The data offers further evidence that a resurgent Delta COVID variant and slowed consumer spending doesn't necessarily translate into increased layoffs.

Economists estimate that U.S. employers added 720,000 new jobs to payrolls in August -- a modest deceleration from July, but the third straight month of robust gains after the pace of hiring cooled in the winter and spring. The Labor Department will release the August nonfarm employment report 8:30 a.m. ET Friday.

Other economic data, however, suggests the labor market's recovery is far from complete, with businesses across the country still struggling to rehire a qualified workforce. Wednesday's manufacturing data released by the Institute of Supply Management showed that difficulties in filling open positions continue to limit manufacturing growth potential.

Next, investors will gauge through the latest data on factory orders due out 10:00 a.m. ET, for further clues on economy's performance under a new wave of COVID-19 infections.

At the opening bell Thursday, stocks on Wall Street moved higher and the dollar index traded near a three-week low 92.455, offering tepid support for front-month WTI futures. NYMEX WTI October contact rallied $1.28 to $69.85 bbl, and Brent crude for November delivery advanced $1.15 to $72.77 bbl. NYMEX October RBOB futures rallied 4.30 cents to $2.1536 gallon, and front-month ULSD futures strengthened to $2.1673 gallon.

Further spurring gains for the complex, Organization of the Petroleum Exporting Countries and Russia-led partners reaffirmed their agreement on Wednesday to gradually raise production until the end of this year, bringing back 400,000 barrels per day (bpd) in shut-in output each month. There was speculation the group would consider boosting joint production by more-than-expected after Russia's energy minister Alexander Novak suggested that the second largest producer within the coalition could increase output well above OPEC+ limits.

"Global oil demand is seen growing between 5.8 million and 6 million bpd this year," Novak told reporters following the conclusion of the meeting, adding that he expects the oil market to be fully restored next year.

"Joint actions allowed to take away [oil] excess accumulated when demand was down -- think we have fulfilled this task. Now it is important to maintain this balance and synchronize production and demand as the market rebounds," Novak, also Russia's deputy prime minister, said.

Technical panel for OPEC+ found the global oil market would remain in a 900,000-bpd deficit for the remainder of the year before flipping to surplus in 2022.

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

Liubov Georges