DTN Oil

WASHINGTON (DTN) -- After a two-session selloff, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange rallied Friday, with front-month West Texas Intermediate rebounding from Thursday's $78.25-per-barrel (bbl) four-week low on the spot continuous chart. The gains followed an agreement by the Organization of the Petroleum Exporting Countries and Russia-led partners to keep supplies tight next month, while an upbeat U.S. employment report, showing accelerated jobs growth in October, fueled additional buying interest.

On the session, NYMEX WTI for December delivery rallied $2.46 to settle at $81.27 per bbl after trading as low as $78.96 per bbl earlier in the session, and the ICE January Brent contract surged $2.20 to $82.74 per bbl. Although advancing sharply on the session, both crude benchmarks still posted week-on-week losses of about 2.5%.

NYMEX RBOB December futures advanced 2.83 cents to $2.3209 per gallon, and front-month NYMEX ULSD futures gained 4.9 cents to $2.4556 per gallon.

U.S. economy added 531,000 new jobs last month -- the biggest gain in three months, the Labor Department said Friday morning, with leisure and hospitality industries driving those gains. Nationwide, job growth was also stronger in August and September than previously estimated, with new data boosting employment over the two-month period by 235,000 jobs. The unemployment rate fell 0.2% last month to 4.6%, but the labor participation rate remained unchanged at 61.6%, remaining within a narrow range of 61.4% and 61.7% since June 2020. Despite signs of some progress, the economy is still short the 4 million jobs it had prior to the pandemic when the unemployment rate was at a 50-year-low 3.5%.

Friday's employment report also emboldened Federal Reserve narrative of "required progress" in the labor market to withdraw unprecedent stimulus measures that were put in place at the start of the pandemic.

This week, Federal Open Market Committee announced tapering of $120 billion a month in bond-buying stimulus that was designed to ensure free flow of credit in the pandemic-stricken economy. The Fed has said it would keep interest rates near zero until inflation is projected to moderately exceed its 2% target and until hiring conditions are consistent with maximum employment.

Wednesday's inventory report from the U.S. Energy Information Administration was mostly bearish, triggering a two-day selloff across the oil complex. EIA data showed domestic crude oil inventories increased 3.3 million bbl last week, while domestic crude oil production spiked to the highest level since May 2020 at 11.5 million barrels per day (bpd).

The number of oil-directed rigs in the United States increased six to 450 as of Friday, the highest number of active rigs since early April 2020, Baker Hughes reported Friday afternoon. There are 224 more rigs drilling for oil now than during the comparable week a year ago.

Against this backdrop, OPEC+ agreed this week on a measured production increase of 400,000 bpd next month, maintaining its July agreement in which OPEC+ members would return production cut in the depths of the global pandemic 400,000 bpd monthly until all output cut -- 9.7 million bpd -- in April 2020 is returned.

At a news conference following the announcement, Saudi oil minister Prince Abdul-Aziz Bin Salman said, "We believe that gradually increasing oil output is the best course of action. Projected 500,000 bpd in additional fuel demand from gas to oil switch has already occurred. Q1 2022 will also see massive stock builds."

Russian Energy Minister Alexander Novak reiterated this position, adding, "From August until now, we have added 2 million barrels of additional production to the market. So, as planned, we are giving the market more and more volume, as it is recovering, at the same time we also see there is a seasonal drop in demand in the fourth and first quarters of the year, and also there are some signs such as a decrease in oil product demand in the EU in October, which we have observed."

United Arab Emirates Energy Minister Suhail Al Mazrouei stressed the focus on supply and demand when answering reporter questions.

"The 400,000-bpd increase will take us smoothly through to that position, and we are expecting that the ... rebalancing will be happening in the first and second quarter."

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