WTI Oil Rises as U.S. Payroll Gain Signals Strengthening Economy

Jun 06, 2014 3:17 pm ET

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June 6 (Bloomberg) -- West Texas Intermediate crude climbed as U.S. payrolls exceeded their pre-recession peak, signaling greater fuel demand. Brent slipped as world leaders at D-Day commemorations in France discussed the Ukraine crisis.

Futures rose 0.2 percent in New York after the Labor Department said the number of jobs grew 217,000 in May, following a 282,000 gain in April. Russian President Vladimir Putin met with U.S. President Barack Obama and held his first talks with Ukraine’s new leader, Petro Poroshenko, as France used the 70th anniversary of the Allied landings in Normandy to seek a breakthrough in the Ukraine crisis.

“The jobs number is being perceived as a positive sign for the overall economy and bullish for demand,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “We’ll be keeping an eye on events in France today and see if the leaders and officials gathered there will come to any agreements that ease tension in Ukraine.”

WTI for July delivery rose 18 cents to settle at $102.66 a barrel on the New York Mercantile Exchange. Futures declined 5 cents this week. The volume of all futures traded was 14 percent lower than the 100-day average at 2:48 p.m.

Brent for July settlement fell 18 cents to end the session at $108.61 a barrel on the London-based ICE Futures Europe exchange. Volume was 13 percent higher than the 100-day average. The European benchmark crude closed at a $5.95 premium to WTI, down from $6.31 yesterday.

Equities Advance

U.S. stocks led global equities higher after the employment report. The Standard & Poor’s 500 Index increased 0.4 percent and the Dow Jones Industrial Average gained 0.5 percent.

The jobs data marked the fourth straight month employment increased by more than 200,000, the first time that’s happened since early 2000. The gain put total employment beyond its peak of 138.4 million reached in January 2008, one month after the start of the deepest recession since World War II. The number of employees on payrolls stood at almost 138.5 million in May.

The median forecast in a Bloomberg survey of economists called for a 215,000 increase in payrolls last month. The U.S. unemployment rate in May was unchanged at 6.3 percent.

The jobs data “should help demand expectations, at least initially, for oil,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “But, it’s not the kind of blockbuster number that’s going to make us forget about the labor participation rate, which is still historically low.”

The participation rate, which indicates the share of working-age people in the labor force, held at 62.8 percent, matching the lowest level since March 1978.

Putin Meeting

Putin and Poroshenko met for 15 minutes today in northern France, President Francois Hollande’s office said in an e-mailed statement. Putin will send an envoy to the Ukrainian capital, Kiev, when Poroshenko is due to be sworn in after his election victory last month. A possible cease-fire between Ukrainian government forces and pro-Russian rebels will be discussed “in the coming days.”

Obama and Putin had an “informal conversation” lasting 10 to 15 minutes at a lunch for leaders in Normandy, said Ben Rhodes, deputy White House national security adviser. It was the first face-to-face meeting between the two leaders since the crisis in Ukraine erupted.

WTI climbed to a five-month high of $105.22 during trading on March 3 as Russia seized control of the Ukraine’s Black Sea region of Crimea.

Trading Range

The U.S. benchmark crude has traded between $100 and $105 a barrel since May 8 amid the simmering dispute over Ukraine and a decline in U.S. crude inventory levels from record highs.

U.S. crude supplies slipped by 3.43 million barrels to 389.5 million last week, the Energy Information Administration reported June 4. They reached 399.4 million in April, the most since the Energy Department’s statistical arm started publishing weekly data in 1982.

“We’re stuck in a $100-to-$105 range and are within a couple cents of the midpoint,” said Kyle Cooper, director of commodities research at IAF Advisors in Houston. “There’s clearly been a definitive lack of conviction in the market this week. In recent weeks there’s been at least a bias in either an up or down direction, but this week there’s none.”

Fuel prices dropped, capping weekly losses. Gasoline for July delivery declined 1.73 cents, or 0.6 percent, to $2.939 a gallon, down 1.9 percent for the week. Ultra low sulfur diesel decreased 0.85 cent to close at $2.8712, a weekly loss of 0.5 percent.

--With assistance from Christine Buurma in New York.