WTI futures hold near one-week high on US economic outlook, winter fuel demand

West Texas Intermediate crude traded near the highest level in a week after a bigger-than-expected drop in applications for initial jobless benefits spurred confidence of how well the US labor market fares. Investors now awaited the release of allegedly upbeat non-farm payroll and unemployment rate figures later in the day. Persisting cold and stormy weather in the US continued to underpin the market on the demand side, draining the nations distillate fuel supplies.

On the New York Mercantile Exchange, WTI crude for settlement in March fell by 0.21% to $97.63 by 7:50 GMT after ranging between a one-week high of $98.02 and days low at $97.55 per barrel. The US benchmark rose by 0.5% on Thursday and is up 0.2% on weekly basis, set for a fourth weekly gain, the longest winning streak in seven months.

Meanwhile on the ICE, Brent futures for delivery in the same month added 0.10% to trade at $107.30 per barrel. Prices shifted in a daily range between $107.47 and $107.22 a barrel. The European benchmark added 0.9% on Thursday and is up 0.9% on weekly basis so far. Brents premium to its US counterpart widened to $9.35 a barrel, up from $8.87 a day earlier, based on closing prices. The gap narrowed to $7.94 in intraday trading on Wednesday, the lowest since October 10th.

US crude rose for a third day yesterday after a report by the Labor Department showed that the number of people who filed for initial unemployment benefits fell to 331 000 in the week ended February 1st, outpacing projections for a drop to 335 000. The preceding periods reading received an upward revision to 351 000 from initially estimated at 348 000.

The American benchmark also continued to draw support after persisting cold weather across much of the US drained the nations distillate fuel inventories, which decreased for a fourth straight week in the seven days to January 31st. The Energy Information Administration reported on Wednesday that distillate supplies, which include diesel and heating oil, fell by 2.36 million barrels to 113.8 million in the week ended January 31st, slightly less than analysts’s projections for a 2.5-million drop, and remained well below the lower limit of the average range for this time of the year.

The EIA also reported that the nation’s crude oil inventories rose by 440 000 barrels to 358.1 million last week, outperforming analysts’ expectations for an increase of 2.55 million barrels. This was in line with a private report by the industry-funded American Petroleum Institute that showed a build of 384 000 barrels.

Stockpiles at Cushing, Oklahoma, the biggest US storage hub and delivery point for NYMEX-traded contracts, dropped by 1.55 million barrels to 40.3 million after TransCanada’s Keystone XL pipeline began carrying oil from Cushing to the Gulf Coast.

Total motor gasoline inventories rose by 0.5 million barrels last week to 235 million, beating the median projection of 10 analysts surveyed by Bloomberg for a 1.15-million increase.

Jonathan Barratt, the chief executive officer of Barratt’s Bulletin in Sydney, said for Bloomberg: “The positioning for the U.S. economy and what the market is perceiving is providing support for oil. The draw in the products is typical for this time of the year where we see inventories start to decline. That should provide some underlying support to the market.”

Jobs report

Market players will avoid entering big positions before the release of crucial employment data from the US later in the day. According to a Bloomberg survey of analysts ahead of the report, US non-farm payrolls are expected to have jumped to 180 000 in January, up from a mere 74 000 in December. Meanwhile, the jobs report will also likely show that unemployment in the worlds biggest economy remained at a five-year low of 6.7%.

Ben Le Brun, a market analyst at OptionsXpress in Sydney, said for CNBC: “The market is playing a bit of wait and see, but in general there is quite a bit of optimism well get good numbers and that is supporting oil.”

The market also got a lift by forecasts showing the possibility of a new winter storm hitting the Northeast this weekend, days after the latest of a series of brutal storms hit the US on Wednesday, cutting power to over million homes and businesses.

According to a weekly Bloomberg survey of analysts, WTI may decline next week amid lower demand for crude as refineries shut down for maintenance. Nineteen out of 37 participants polled, or 51%, wagered that prices will fall through February 14th, while ten predicted an increase and eight remained neutral.

Supporting the oil complex on the supply side, North Sea crude output is expected to drop in March, aiding the Brent benchmark. Loading of the Brent, Forties, Oseberg and Ekofisk streams is expected to average 890 000 barrels per day, down from 1.03 million bpd in February.

Meanwhile in Libya, nationwide output held in a range between 450 000 and 500 000 bpd, down from last weeks 600 000 bpd, after protesters demanding money interrupted flows from a pipeline in the Zintan region, reducing output from the Sharara oilfield.