WTI, Brent Gain after US Job Growth Eases Recession Fears


   
    

    

   WASHINGTON, D.C. (DTN) -- West Texas Intermediate futures on the New York 
Mercantile Exchange and Brent crude traded on the Intercontinental Exchange 
reversed off six-month lows in afternoon trade Friday after government data 
showed U.S. job growth unexpectedly accelerated in July, lifting the level of 
employment above its pre-pandemic level and easing fears that the world's 
largest economy is teetering on the brink of recession.

   Further supporting the oil complex, the number of active oil rigs in the 
United States unexpectedly fell by seven this week to 598, according to the 
oilfield service provider Baker Hughes, in what could be the first sign that 
falling oil prices are causing producers to scale back on drilling activity. 
This marked the first drop in rig count since late May. The decline was spread 
across several key oil-producing regions including the prolific Permian Basin 
in west Texas and New Mexico. The Permian's oil-rig count dropped by four in 
the latest week to 344.

   The focus of Friday's trading was a blockbuster employment report in the 
U.S. that showed a surprise surge in new hires last month, lifting optimism 
that the economy can indeed dodge the recession bullet. U.S. employers added 
528,000 new jobs last month- the largest since February, compared with an 
expected 250,000 increase. Data for June was also revised higher to show 
398,000 jobs created instead of the previously reported 372,000. July marked 
the 19th straight month of payrolls expansion. Further details of the report 
showed employers continued to raise wages at a strong clip in July and 
generally maintained longer hours for workers. The labor market has now 
recouped all the jobs lost during the COVID-19 pandemic, with overall 
employment now 32,000 jobs higher than in February 2020. Incoming data offset 
some of the pessimism tied to a steady rise in unemployment claims that showed 
a slow deterioration in the labor market over the past two months. Initial 
claims for jobless benefits fell to 260,000 last week - near the highest level 
since November, while continuing claims that run a week behind the headline 
number, totaled 1.42 million, up 48,000 from the prior week and 83,000 from the 
beginning of July.

   It remains to be seen whether strong jobs data will translate into higher 
gasoline demand in coming months. The latest U.S. Energy Information 
Administration data show four-week average gasoline consumption fell to its 
lowest level since late February - typically the weakest driving season of the 
year. At 8.5 million bpd, the weekly demand rate is nearly 12% below the same 
period last year and some 9% below the five-year average. On July 25, the 
American Automobile Association published results of a 1,000-person survey, 
finding that responders have sharply curtailed driving activity in the face of 
$4 plus gasoline. The same quarterly survey in March also identified $5 gas as 
a key sensitively level for some change in driving behavior.

   Supporting this argument, U.S. consumer sentiment fell to the lowest level 
on record at the start of the summer and remained at depressed levels 
throughout July as Americans fretted over the economy, inflation, and rising 
interest rates. "Consumers across income, age, education, geographic region, 
political affiliation, and homeownership status all posted large declines. 
About 79% of consumers expect bad times in the year ahead for business 
conditions, the highest since 2009," the Consumer Sentiment report from June 
stated.

   At settlement, nearby-month delivery WTI gained $0.47 to $89.01 bbl, while 
international crude benchmark Brent contract for October delivery advanced 
$0.80 to $94.92 bbl. NYMEX September RBOB added 6.21cts to $2.8556 gallon, 
while NYMEX September ULSD contract slumped 12.13cts to $3.2159 gallon.

    

    

   Liubov Georges, 1.646.359.4088, liubov.georges@dtn.com, http://www.dtn.com.




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