Oil price hits $90 per barrel on US jobs data
Oil prices bounced back to above $90 a barrel on Wednesday as unexpectedly big gains in U.S. private sector jobs spurred optimism the economy was recovering at a faster pace.
Wall Street and commodities markets latched on to the ADP Employer Services employment report, which showed the biggest rise in its data which goes back to 2000. Oil shook off early losses and turned positive after failing to drop below $88 a barrel.
Oil fell earlier in the day after suffering the biggest single-day drop since mid-November on Tuesday. Crude was initially led lower by a stronger dollar, which typically weighs on commodities as they become more expensive for buyers using other currencies.
Markets are now awaiting the release of December U.S. nonfarm payrolls data due out on Friday for further signs the U.S. economy is recovering more quickly than expected.
Traders shrugged off U.S. oil inventory data that showed the fifth straight week of crude stockpile declines, attributing the draw to year-end moves by oil companies to ease tax burdens rather than to rising demand.
Oil’s rally back was led by London Brent crude, which was bolstered by a chemical plant fire at the Dutch Moerdijk industrial zone which affected shipping traffic in the Europe’s busy Rotterdam-Antwerp ports. The fire did not impact Royal Dutch Shell’s oil refinery there.
ICE Brent February crude settled up $1.97 at $95.50 a barrel. NYMEX February crude ended up 92 cents at $90.30. Brent’s premium to the U.S. benchmark West Texas Intermediate surged above $5 a barrel, the highest in seven months.
SUPPORTIVE ECONOMIC DATA
U.S. private sector employment surged in December, adding 297,000 jobs, nearly three times more than some forecasts, the closely watched ADP report showed, the most bullish signal in months that the recovery in the world’s biggest economy is stepping up a notch.
The Institute of Supply Management also reported that its gauge of the massive U.S. services sector reached its highest level in more than four years.
“As equities rallied, the oil bulls that were on the sidelines came back and prices are bouncing back solidly,” said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.
In late trade, the U.S. dollar regained its strength and was up 1.03 percent against a basket of currencies.
U.S. oil prices have returned to above $90 after a profit-taking binge that slashed values to just above $89 on Tuesday. Crude ended 2010 at $91.38, 15 percent higher than a year ago.
At current levels, oil has risen to a “danger zone” that could harm the global economic recovery, according to a Financial Times interview with Fatih Birol, chief economist of the International Energy Agency, the West’s energy watchdog based in Paris.
“The oil import bills are becoming a threat to the economic recovery. This is a wake-up call to the oil consuming countries and to the oil producers,” Birol told the FT.
While many believe crude prices could top $100 a barrel this year, analysts say Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries would move to increase oil production to calm markets if crude prices rose to a level that could threaten the global economic recovery.
Source: Reuters