WASHINGTON (DTN) -- Reversing earlier losses, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled Thursday's session higher, lifting the U.S. crude benchmark above $78 barrel (bbl) after the U.S. Department of Energy said it was not planning to release crude from its emergency reserves or ban exports of crude oil to rein in surging fuel prices.
Thursday's statement contradicted comments made by U.S. Secretary Jennifer Granholm on Wednesday who said the federal government has several tools to cool off rallying energy prices, including a potential release of oil from strategic petroleum reserves and an export ban. Market observers were quick to point out that a ban on U.S. crude exports would only stymie production growth, further exacerbating concerns over supply shortages. Meanwhile, plans to release emergency supplies from SPR -- the world's largest emergency stockpiles of crude -- is simply not considered "at his time," according to reports.
The news came shortly after Goldman Sachs estimated that if the DOE released oil from the SPR in response to higher prices, it would likely be limited to just 60 million bbl -- posing a $3 downside risk to its $90 bbl Brent forecast. The SPR contained 617.8 million bbl of oil last week -- roughly equal to about a month of U.S. petroleum products demand.
Immediately following the news, oil prices moved on the offensive, lifting both benchmark crudes towards the multiyear highs reached earlier this week. At settlement, NYMEX November West Texas Intermediate futures advanced $0.87 to $78.30 bbl after trading as much as 2% lower earlier during the session, and ICE December Brent contract added $0.87 to finish a tad below $82 bbl. NYMEX November ULSD futures gained 1.76 cents to $2.4596 gallon, and front-month RBOB futures moved up 2.62 cents for a $2.3344 gallon settlement.
The oil complex came under pressure after Russia's President Vladimir Putin on Wednesday suggested Moscow would increase gas flow into the European Union to mitigate the energy crisis there. European gas prices hit new record highs this week amid depleted inventories and lower-than-expected output from renewable energy.
In Europe, natural gas prices are now trading at the equivalent of $230 bbl in oil terms -- up more than 130% since the beginning of September and more than eight times higher than the same time last year, according to data from Independent Commodity Intelligence Service.
In broader markets, stocks on Wall Street rallied and the dollar index softened against a basket of foreign currencies after U.S. unemployment claims fell for the first time in over a month last week, easing some concerns over slowing improvement in the labor market. Department of Labor reported 326,000 Americans applied for first-time unemployment benefits last week, down 38,000 from the previous week's revised levels, while the number of Americans receiving unemployment benefits for consecutive weeks fell by 97,000 to 2.714 million.
The data came at a time when most pandemic-related programs that extended unemployment benefits have ended, and amid hopes that declining COVID cases would spark a round of aggressive hiring during the fall.
On Friday, investors will shift their focus to the nonfarm payroll report released by the Department of Labor at 8:30 a.m. EDT, with consensus calling for job growth to accelerate to 435,000 in September from 235,000 new jobs in the prior month. Since June, the U.S. labor market recovered 1.197 million jobs, adding an average 399,000 positions each month over the summer. Still, there are about 8.4 million Americans who remain unemployed.
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