A weaker US dollar helped propel crude futures higher May 7 despite a weaker-than-expected US jobs report and continued concerns regarding Asian demand.
June NYMEX WTI settled up 19 cents at $64.90/b and July ICE Brent climbed 19 cents to finish at $68.28/b.
US payrolls expanded by 266,000 jobs in April, Department of Labor data showed May 7, down nearly 500,000 from the month prior and well below market expectations that the economy would add around 1 million new jobs last month. The weak jobs report pushed the US unemployment rate up to 6.1%, marking the first monthly increase in 13 months.
NYMEX June RBOB settled 1.32 cents higher at $2.1269/gal and June ULSD rallied 2.11 cents to settle at $2.0106/gal.
Crude traded down to session lows following the jobs report but rallied in early US trading as the dollar moved sharply lower. The ICE US Dollar Index fell to 90.216 in afternoon trading, down from 90.951 on May 6 and on pace for the lowest close since Feb. 25.
The weak jobs report was also supportive for longer-term market outlooks as it pointed toward a continuation of US stimulus efforts and dovish fiscal policy, analysts said.
“The big jobs miss does provide some underlining support in a weaker dollar that’s very positive for commodities, especially oil,” OANDA senior market analyst Edward Moya said. “The demand outlook is looking very good in the US and is improving in Europe, but until India is heading in the right direction you are going to see and oil rally be constrained.”
Comments from Treasury Secretary Janet Yellen last week calling for higher interest rates had raised concerns the Federal Reserve could adopt a more hawkish stance toward markets, presenting headwinds to oil prices in recent sessions, Price Futures Group analyst Phil Flynn said, but these concerns faded following the weak jobs report.
Meanwhile the worsening COVID-19 situation in India continues to weigh on market sentiment.
On May 6, the country reported a record 412,262 new cases and a record 3,980 daily death toll, according to its health ministry.
“India is already seeing oil refiners undertake maintenance as demand waivers amid the surge in cases. This is likely to keep a lid on prices until there is more clarity around the impact new restrictions in countries like India is having on demand,” ANZ Research analysts said in a May 7 note.
Market analysts, however, emphasized that global demand is still intact amid a larger-than-expected drawdown in US crude inventories and expectations of further demand recovery as the US and Europe outlined plans to reopen their borders.
“Right now, it [Asian demand uncertainty] is holding back the oil price a bit, but the main direction is higher, and the US still has more demand to come,” Bjarne Schieldrop, Chief Analyst Commodities at SEB, said.
Expectations of bullish US summer driving demand and tight supply helped push the ICE New York Harbor RBOB crack versus Brent to $21.01/b in afternoon trading, the highest since August 2017.