Oil gains on U.S. jobless data, Egypt unrest

WTI prices hit a 14-month high on Friday as positive readings of unemployment data boosted demand prospects in the worlds biggest consumer. Meanwhile, the Egyptian army declared a state of emergency in the Suez and South Sinai provinces, pushing oil to its highest weekly gain since June.

On the New York Mercantile Exchange, WTI crude for August delivery traded at $102.00 per barrel at 14:44 GMT, up 0.75% on the day. Light, sweet crude hit a 14-month high of $102.44 minutes after the data was released, while days low stood at $100.91 per barrel. WTI is marking a fifth straight day of gains, up 5.7% this week after settling 2.73% higher the previous one.

Meanwhile on the ICE Futures Exchange, Brent oil for August delivery traded at $106.63 per barrel at 14:45 GMT, up 1.03% on the day. Prices held in range between daily high and low of $107.32 and $105.39 per barrel respectively. The European benchmark has advanced more than 4.5% so far this week, following a 1.07% advance in the preceding one.

Upbeat U.S. jobless data

Futures rose to the highest level since May 14, 2012 as the U.S. labor department reported that the economy created the same amount of Jobs during June as in May, confirming a consistent economic recovery. The Change in Non-Farm Payrolls indicator surpassed expectations for a 165 000 reading, surging to 195 000, aligning to May’s revised reading. The Unemployment Rate for June in the world’s biggest economy failed to meet expectations of a decline to 7.5% but remained unchanged at 7.6% compared to May.

Average Weekly Hours met projections and remained the same compared to June at 34.5 hours, whereas Average Hourly Earnings surged to 0.4%, surpassing projections of a 0.2% gain and above May’s 0.1% revised reading.

The exceedingly positive U.S. economic data supports oil demand in the short-term, but prices are threatened by an earlier-than-expected deceleration of Feds Quantitative Easing program, which is one of the key factors to determine dollars strength. Dollar-priced commodities tend to trade inversely to the greenback as strengthening of the currency reduces their appeal as an alternative investment and makes them more expensive to foreign currency holders. Ben Bernanke, Fed chairman, announced after the latest FOMC meeting that the central bank will most probably taper its monetary stimulus during the second half of the year and bring it to an end by mid-2014, if the required signs of consistent economic recovery are provided. So far, most of the important U.S. indicators have succeeded to meet or surpass expectations, which is in line with Feds requirements. Raw materials have been fluctuating throughout the year following shifting expectations of Feds moves and news of an actual scale back will delivery a heavy blow to commodities.

Olivier Jakob at consultancy Petromatrix in Switzerland commented for Reuters on the influence of both U.S. labor market data and political unrest in Egypt: “Its both factors really (Egypt and jobs data). If one looks at nonfarm payrolls, it is more likely that the U.S. Federal reserve will implement tapering of quantitative easing, pushing up the dollar. If the U.S. economy improves it is good for U.S. oil demand but if the dollar rises because of lower quantitative easing, it will reduce purchasing power for emerging markets, which are driving new oil demand.”

Egypt turmoil

WTI and Brent crude marked biggest weekly gains since June as political unrest in Egypt threatened to cut the 2.24 million per day oil flow through the Egypt controlled Suez Canal. Egypt’s army supported mass protests and forced President Mohamed Mursi from power on Wednesday, one year after his election. Adly Mansour was selected to replace Mursi as a military-appointed interim president.

On Friday, the al Ahram newspaper reported Egypt declared a state of emergency in the Suez and South Sinai provinces. However, a canal official said for Reuters that ports and shipping through the Suez canal have been operating normally.

Ole Hansen, the head of commodity strategy at Saxo Bank A/S in Copenhagen, said for Bloomberg: “Even though the news didnt relate to the Suez Canal specifically, it nevertheless spooked the market. It shows with what ease geo-political news can drive oil markets, especially when speculative accounts are already long and happy to buy more on any further break.”