WTI Futures Jump 5% after US Jobs Data Boosts Demand Hope
WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange oil futures and Brent
crude on Intercontinental Exchange spiked Friday amid a one-two bullish punch
as major oil producers bring forward their long-anticipated meeting to Saturday
(6/6), with expectations for 9.7 million bpd in currently agreed to production
cuts for June to be extended for another month coupled with supportive U.S.
jobs data, portending a strong recovery in driving demand recovery in the weeks
Oil price rally went into overdrive after a surprisingly robust U.S. jobs
report showed a 2.5 million job gain in May versus expectations for an 8
million loss, and after the economy lost 20 million jobs month prior. The
report sent shockwaves across markets, with the Dow Jones Industrials surging
900 points and S&P 500 advanced 2.5%, extending the strongest 50-day rally on
"This is not going to be a V-shape recovery. It will be a rocket ship!" said
U.S. President Donald J. Trump in news conference following the report.
Unemployment claims have tapered lower in recent weeks as states began to
partially reopen their economies. Other real-time indicators, including
mobility indexes and TSA flight data have trended higher, pointing to a
recovery. Oil demand suffered substantially from the lockdowns intended to curb
the spread of COVID-19 pandemic, which drove down global oil consumption as
much as 30% in April.
The oil price rally was further fueled by ongoing supply reductions by the
Organization of the Petroleum Exporting Countries, Russia and partners, with an
agreement reducing output by 9.7 million bpd taking effect on May 1. Markets
are anticipating the 23-nation group to extend their cuts for another month
after Saudi Arabia and Russia appear to have reached a tentative supply
agreement this week. Markets remain cautiously optimistic that some smaller
producers that fell behind on pledged quotas would manage to deliver on
promised reductions. Saturday's discussion will be centered on the mechanisms
to monitor the timely compliance with the agreement, a prerequisite for
extended supply cuts.
In the United States, Baker Hughes reported the number of active oil rigs
fell 16 in the week-ended today to 206, the lowest U.S. rig count in 11 years.
U.S. oil rig count is down 583 against year ago, while 477 less than 12 weeks
prior when the string of falling rigs began, with 458 rigs taken out of service
in the second quarter.
On Friday, NYMEX West Texas Intermediate July futures surged $2.14 or 5% to
settle at three-month spot high $39.55 bbl and Brent crude for August delivery
jumped above $42 bbl, gaining over $4 bbl on the week amid growing expectations
for extended supply cuts by OPEC+ producers. NYMEX RBOB July futures rallied
6.46cts to a three-month spot high $1.2136 gallon and NYMEX ULSD futures
finished Friday's session 7.65cts higher at $1.1506 gallon.
Liubov Georges, 1.646.359.4088, firstname.lastname@example.org, www.dtn.com.
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