Oil weekly recap, March 3 – March 7

West Texas Intermediate crude rose on Friday as better-than-expected US nonfarm payrolls fanned positive sentiment for the US economys recovery state, bolstering demand outlook in the worlds top consumer. The US benchmark however settled the week lower for the first time in eight weeks and Brent marked a second weekly decline as US crude supplies rose, while market players feared no imminent military action in Crimea. Worries over demand in China after a recent spite of weak numbers also pressured the market.

On the New York Mercantile Exchange, WTI crude for delivery in April rose by 1% on Friday to $102.64 per barrel. The US benchmark added 0.1% on Thursday, but settled the week 1 cent lower, marking its first weekly decline in eight weeks. Prices surged by the most in three months on Monday, spiking to a 5-1/2-month high of $105.22.

Meanwhile, Brent futures for settlement in the same month rose by 0.83% to settle at $109.00 per barrel on Friday, but marked a second straight weekly decline. Prices jumped by 2% on Monday and touched a 2-month high of $112.39 a barrel. Brents premium to its US counterpart narrowed to $6.36 per barrel, down from $6.54 on Thursday.

WTI erased most of its weekly decline on Friday after better-than-expected job growth in the US in February boosted the US economys outlook. The Labor Department reported that US employers added 175 000 jobs in February, exceeding analysts forecasts for a moderate jump to 149 000. Moreover, Januarys reading was revised up to 129 000 from initially estimated at 113 000.

Meanwhile, the US unemployment rate rose to 6.7%, trailing expectations to remain flat at 6.6%, as more people entered the labor force seeking work, but only few were able to find such, the department’s survey of households showed.

Average Hourly Earnings jumped by 0.4%, beating both forecasts and Januarys reading of 0.2% growth.

Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said, cited by Bloomberg: “The jobless figures are a positive reflection of economic strength and energy demand going forward. It’s nice to be moving higher on an economic development and not a geopolitical crisis.”

Oil prices drew support on Thursday after the US Labor Department reported that the number of people who filed for initial unemployment benefits in the week ended March 1st fell to a three-month low of 323 000, outpacing expectations for a drop to 336 000. The preceding period’s reading was revised up by 1 000 to 349 000.

Also giving prices a boost, nationwide output in Libya remained at a fraction of its capacity as the 340 000-bpd El Sharara oilfield remained blocked by protesters. Libyas defence minister held talks this week with the people blocking it, but there was no news whether it will reopen soon. The country currently produces around 230 000 bpd, down from 1.4 million in July.

Meanwhile, Libya also threatened on Saturday to bomb a North Korean-flagged tanker, if it attempted to load oil from a rebel-controlled port.

“The tanker will be bombed if it doesnt follow orders when leaving the port. This will be an environmental disaster,” Prime Minister Ali Zeidan said on television.

Ukraine fears

Although the tension over military action in Crimea had receded, causing prices to retreat from Mondays multi-month highs, market players still feared a possible escalation before a diplomatic solution is found. President Barack Obama authorized financial sanctions against Russia, while the European Union ceased visa and trade talks and warned of possible economic measures.

In response, Russia said that any US sanctions against Moscow over the conflict in Ukraine will boomerang back on the US. Russias Foreign Minister Sergei Lavrov held a telephone conversation with his US counterpart John Kerry discussing “hasty and reckless steps” that could harm Russian-American relations.”

Oil prices snapped two days of losses on Thursday after the Moscow-backed parliament of the Crimea region voted to join Russia, scheduling a referendum for March 16th, a lot earlier than the initial plans for it to be held in May.

Apart from the financial aid that the European Union is ready to provide to Ukraine, the US House of Representatives voted $1 billion in loan guarantees for the country, the first formal response by US lawmakers to the conflict.

Phil Flynn of Price Futures Group in Chicago, said, cited by CNBC: “The stronger jobs numbers showed stronger demand. But the reason were not up dramatically on the Ukraine news is there are real concerns about China.”

China’s manufacturing activity plunged to an eight-month low in February, data by the National Bureau of Statistics showed, with its Purchasing Managers’ Index falling to 50.2 from January’s reading of 50.5. A separate private survey by HSBC matched expectations for a rebound to 48.5 from January’s 48.3, which was the poorest performance since July.

Meanwhile, Chinas National Bureau of Statistics reported on Sunday that consumer prices rose much slower than expected in February. Consumer inflation rose by 0.5% last month, trailing analystsexpectations for a slowdown to 0.8% from the preceding months 1% advance. Year-on-year, Chinas CPI registered at 2.0% growth and matched expectations, but trailed the previous months 2.5% advance.

Producer inflation decelerated by 2.0%, underperforming anticipations for posting at -1.9% following the previous months 1.6% contraction.

Premier Li Keqiang said at the annual meeting of the National People’s Congress this week that the Asian economy’s growth target for 2014 remains unchanged from the previous year at 7.5%, while consumer inflation should be reined at about 3.5%.

US oil inventories

The oil market was also pressured after the Energy Information Administration reported a seventh consecutive weekly gain in US crude inventories on Wednesday, while distillate supplies rose against expectations. Crude stockpiles jumped by 1.4 million barrels in the seven days through February 28th.

At the same time, refineries’ utilization rate slid by 0.6% to 87.4% from a week earlier, while domestic crude production jumped to 8.08 million barrels per day, remaining close to a the 25-year high of 8.16 million bpd which was registered in the week ended January 10th.

Losses were limited as stockpiles at Cushing, Oklahoma, the biggest US storage hub and delivery point for NYMEX-traded contracts, registered a fifth straight weekly decline and fell to a two-year low of 32.1 million barrels from 34.8 million a week earlier. However, building up market sentiment that the southern leg of TransCanada’s KeystoneXL pipeline is only transferring Cushing’s bottleneck to the Gulf Coast is worrying some market participants, as the pipeline has had no positive impact on overall crude reserves so far.

The EIA also reported that distillate fuel inventories, which include diesel and heating oil, unexpectedly rose by 1.4 million barrels, defying analysts’ expectations for a drop by 1 million. Total motor gasoline reserves slid by 1.6 million barrels, outperforming forecasts for a 1-million decline, but are above the upper half of the average range.