In contrast to the optimism in gold, the oil market remains in a deep funk about oversupply and demand and Friday’s weak US jobs report for May didn’t improve matters one bit.
So oil futures ended Friday and the week at their lowest level in more than three weeks, after the largest weekly loss in a month.
Blame a combination of the weakish jobs report (138,000 new jobs created, around 45,000 less than expected and 85,000 jobs sliced off the estimates for March and April), rising US production and President Trump’s withdrawal from the Paris Climate Accord on top of fears of a persistent oversupply of oil.
And a big rise in the number of active US oil rigs didn’t help.
So July West Texas Intermediate crude futures slid 70 cents, or 1.5%, to settle at $US47.66 a barrel, for its lowest close since May 10 – down 4.3% for the week, which was the largest weekly decline since the week ended May 5.
In London August Brent the global benchmark, dropped 68 cents, or 1.3%, to $US49.95 — a loss of 4.9% for the week.
In its weekly rig-count report issued Friday, oil services group, Baker Hughes said 11 extra rigs were being used to look for oil last week taking the figure in total to 733.
That was the 20th straight weekly rise, a stretch spanning roughly five months, pointing to further gains in oil production later in the year.
As a result, the total active US rig count, which includes oil and natural-gas rigs, climbed by 8 to 916 (three fewer gas rigs were in use).
The Friday weakness in crude added to the sharp drop seen last week, when disappointment that Opec didn’t deepen the agreed production cuts , or extend it longer than the 9 months agreed to.
US production was 9.320 million barrels a day last week, 607,000 barrels a day more than a year ago (a rise of just over 6%).
The Financial Times on Friday reported that Igor Sechin, chief of Russia’s largest oil producer Rosneft, said US oil companies could add up to 1.5m b/d to global output next year, countering production curbs by Opec and producers outside of the cartel.
“Lower oil output from the Opec and non-Opec agreement could be considerably offset by as early as mid-2018 by US shale oil production growth,” he warned, adding to the market angst.
The US average daily output last week of 9.320 million was the highest level since August 2015.
That has the market really concerned and each weekly rise in the number of active rigs in use in the US adds to the concern and pressures on prices.
