- Oil prices rise with the stock market after the United States reported a surge in employment in its monthly jobs report.
- China’s factory activity shrink by the most in almost three years in January amid slumping orders.
- U.S. sanctions on Venezuela’s PDVSA are keeping tankers stuck at ports as American refineries that rely on Venezuelan feedstocks cut back operations.
Oil prices jumped with the stock market on Friday after the United States reported a surge in employment in its monthly jobs report.
U.S. payrolls rose by 304,000 in January even as the country weathered the longest government shutdown in history.
International Brent crude oil futures were up $1.01, or 1.7 percent, at $61.85 per barrel around 11 a.m. ET (1400 GMT). U.S. West Texas Intermediate (WTI) futures were up 74 cents, or 1.4 percent, at $54.53 per barrel.
Crude traded flat earlier on Friday as hopes the United States and China could soon settle their trade disputes offset data from China that stoked concerns over an economic slowdown that could dent demand for fuel.
Global markets gained support from comments on Twitter by U.S. President Donald Trump on Thursday, saying he would meet Chinese President Xi Jinping soon to try to resolve a trade standoff, though Trump later warned that he could postpone talks if a comprehensive deal remains elusive.
“Many traders recognize that sense is likely to prevail and a deal will be struck after the summit – although the shape of any deal will continue to drive a jittery market,” Cantor Fitzgerald Europe said in a note.
“This has overshadowed bullish indicators.”
Crude prices were weighed down by a survey on Friday that showed China’s factory activity shrank by the most in almost three years in January, reinforcing fears that a slowdown in the world’s second-largest economy is deepening.
The U.S.-China trade dispute and tightening financial conditions worldwide have hurt manufacturing activity in most economies, including in China, where growth last year was the weakest in nearly 30 years.
With Chinese industry a key consumer of fuels such as diesel, such a slowdown is also likely to hit fuel demand.
Generally, however, analysts believe that the oil market will be more balanced in 2019 after supply cuts from the OPEC. A Reuters poll showed that OPEC pumped 30.98 million barrels per day (bpd) in January, down 890,000 bpd from December.
In Venezuela, meanwhile, U.S. sanctions imposed on state oil company PDVSA this week are keeping tankers stuck at ports as American refineries that rely on Venezuelan feedstock cut back operations.
“The latest U.S. sanctions could directly halt around 500,000 barrels per day (bpd) of Venezuelan exports to the U.S.,” Citi bank said.
Much Venezuelan crude oil is rated as heavy and requires the light petroleum naphtha, much of it supplied from the United States, for dilution before export to refineries.
“An additional 350,000 bpd of Venezuelan oil output is at risk due to the lack of U.S. dilutents, a result of the U.S. product exports ban with immediate effect,” Citi said.
Some relief especially to U.S. refiners may come in the form of Canadian heavy crude, despite infrastructure constraints between the two countries.
“The Alberta government announced it was increasing the oil production curtailment limit for February and March to 3.63 million bpd, which translates in restoring 75,000 bpd of the 325,000 bpd cut announced in December,” U.S. investment bank Jefferies said on Friday.
— CNBC’s Tom DiChristopher contributed to this report.
The United States Oil Fund LP (USO) was trading at $11.64 per share on Friday afternoon, up $0.29 (+2.56%). Year-to-date, USO has declined -3.08%, versus a 1.71% rise in the benchmark S&P 500 index during the same period.
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