WTI Tops $90 on Weather, USD Weakness Ahead of Jobs Report

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 reversed sharply higher in afternoon trade Thursday, lifting West Texas Intermediate above $90 per barrel (bbl). The moves came amid a one-two punch of a rapidly weakening U.S. dollar index ahead of the release of U.S. employment report for January that could show job losses, and a potential for wellhead freeze-offs in Texas and Oklahoma oilfields as a potent winter storm lays siege on a large swath of the country from northeastern Texas, through the Midwest to states in the Northeast.

DTN Weather forecasts negative temperature anomalies for several cities along the storm's 2,000-mile path through this weekend and into early next week, including subfreezing temperatures in Dallas-Fort Worth area and Tulsa, Oklahoma, with readings below freezing seen in Houston from Thursday through Saturday. Prolonged subfreezing temperatures could lead to wellhead freeze-offs, frozen pipes, and equipment failures, as numerous pipelines in Texas run aboveground and equipment is largely unwinterized. The region's cold anomaly resurrected memories of Winter Storm Uri a year ago, when more than 1.3 million bbl in daily oil output was shut-in.

As of Thursday afternoon, the Texas power grid was meeting the state's electricity demand, according to the Texas Gov. Greg Abbott and state officials managing Texas's emergency response to the winter response.

In financial markets, U.S. dollar index slumped more than 0.5% against a basket of foreign currencies to finish the session at two-week 95.379, as currency traders' position ahead of January's nonfarm employment report set for release at 8:30 a.m. EST on Friday. The median consensus calls for roughly 200,000 jobs to have been added last month, but not all economists are so optimistic. Investment bank Goldman Sachs expects Friday's report to show a decline of 250,000 jobs, with the wide range of expectations including estimates that as many as 400,000 job losses occurred last month.

U.S. jobless claims leading up to the report do not paint a rosy picture. Weekly applications for unemployment benefits rose for the first two weeks of January before reversing this trend around the midmonth -- roughly around the time when the Bureau of Labor Statistic stops its data collection.

On Wednesday, payroll provider Automatic Data Processing indicated private businesses shed 301,000 jobs last month -- the biggest drop since the start of the pandemic. The pandemic-sensitive leisure and hospitality industry was responsible for more than half of the decline, as companies in the sector reported a 154,000 decline in employment. Manufacturing also lost 21,000 positions, while education and health services reported a drawdown of 15,000 and construction fell by 10,000.

Overseas, European Central Bank kept interest rates unchanged on Thursday and reassured that it would continue to buy Eurozone bonds on a large scale through much of the year. The ECB policy stance is now divergent from other major central banks like the Federal Reserve that are moving aggressively to phase out accommodative monetary policy amid a spike in inflation. Inflation in the Eurozone rose to a record of 5.1% in January, more than double the ECB's target primarily driven by surging energy prices.

In the United States, inflation is running uncomfortably hot, with markets expecting consumer price index for January to have moved above 7%. Last week, the Federal Reserve signaled the central bank would likely make the first interest rate increase in three years as early as March.

On the session, March WTI futures added $2.01 to settle at $90.27, and international benchmark Brent crude for April delivery advanced $1.64 for a $91.11 per bbl settlement. NYMEX March RBOB futures rallied 3.57 cents to $2.6427 gallon, and March ULSD futures surged more than 7 cents to $2.8395 per gallon.

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

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

Liubov Georges