Oil prices end lower after U.S. jobs report, posting a loss for the week

By Myra P. Saefong

Survey shows February OPEC+ compliance rate of 97.8% with voluntary output cuts

Oil futures declined on Friday, contributing to an overall loss for the week, as downward revisions to previous U.S. monthly jobs data raised concerns over the strength of the economy, and demand for oil.

Price moves

West Texas Intermediate crude CL00 for April delivery CL.1 CLJ24 fell 92 cents, or 1.2%, to settle at $78.01 a barrel on the New York Mercantile Exchange. Prices for the front-month contract ended nearly 2.5% lower for the week, according to Dow Jones Market Data.May Brent crude BRN00 BRNK24, the global benchmark, lost 88 cents, or 1.1%, to settle at $82.08 a barrel on ICE Futures Europe, down 1.8% for the week.April gasoline RBJ24 lost 1.1% to $2.53 a gallon, down 3.3% for the week, while April heating oil HOJ24 declined by 2% to $2.64 a gallon, for a weekly loss of 2.3%.Natural gas for April delivery NGJ24 settled at $1.81 per million British thermal units, down 0.7% Friday, for a weekly loss of 1.6%.

Market drivers

Oil futures posted weekly losses, with U.S. benchmark prices ending at their lowest since Feb. 26.

Prices extended early Friday losses after U.S. data revealed a bigger-than-expected 275,000 new jobs in February, but also downwardly revised the number of jobs created in January and December. Employment growth in the two months was 167,000 lower than previously reported.

The jobs report had some good news in the nonfarm payrolls report for February, but "hidden in the data" were revisions to the numbers reported for January and December, and an increase in the unemployment rate to 3.9%, said Gary Cunningham, director of market research at Tradition Energy.

"That indicates to many that job certainty is down and that can manifest in less likelihood to take vacations and travel, which in turn indicates lower petroleum demands in the U.S.," he said.

Overall, oil has been "caught between support from the prolonged output cuts by OPEC+ and some questions on global demands, driven both by the Chinese setting their growth at 5% and fears of the U.S. still not being able to control inflation," Cunningham told MarketWatch.

U.S. crude production is "strong, which is giving traders pause on just how bullish things can get despite the OPEC+ cuts and the potential for both Iranian and Venezuelan barrels to flow in the near future," he said.

OPEC+, which comprises members of the Organization of the Petroleum Exporting Countries and their allies, including Russia, produced 41.21 million barrels of oil per day in February, according to latest Platts survey by S&P Global Commodity Insights. February was the second month of the group's latest voluntary production cuts which were supposed to take approximately 700,000 barrels per day off the market in the first quarter of 2024, the report on the survey said.

However, "the group has yet to deliver on this pledge," the report said. "The survey showed that OPEC+ countries implementing cuts produced 175,000 [barrels per day] above their combined quotas in February - a compliance rate of 97.8%."

Over in the U.S., the number of rigs actively drilling for oil fell for the first time in three weeks, down 2 to 504, according to Baker Hughes (BKR) data. That implies a potential future decline in U.S. output.

Meanwhile, gains in electric vehicles sales in China "caught some eyes, but it isn't likely to be enough to stem the dragon's appetite for fuel," said Cunningham. China's sales of battery-powered EVs rose 18.2% in January-February, compared with 20.8% for all of 2023, Reuters reported, citing data from the China Passenger Car Association.

Next week in the oil market, "we expect more focus to be on petroleum demand outlooks for the coming summer holiday driving season, but especially here in the U.S. where consumers stayed a bit closer to home last year and we didn't have gasoline demands as high as expected," Cunningham said.

-Myra P. Saefong

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03-08-24 1548ET

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