Oil prices jumped sharply for a second day in a row on Friday, hitting their highest levels in more than a year, after the stronger-than-expected US jobs report and decision by OPEC and its allies not to increase supply in April.
The surge took weekly gains to between 5% and 7% for Brent and West Texas Intermediate (WTI) crude as prices reached levels last seen in January 2020.
A stronger US dollar had no impact on oil’s surge.
But analysts point out that this surge is based on a mirage – with economic activity still well short of pre-Covid levels and little sign of any rebound in domestic and especially international travel, demand for jet products like jet fuel and petrol will remain weak for months to come.
And they also point out that eventually the higher prices will produce cheating by OPEC and Russia (which regularly produces more than it says it does) and the extra supply will crunch any gains.
Vaccinations will only assist to maintain demand, not grow it above pre-Covid levels. At the same time the continuing growth of renewables (and electric vehicles) is eroding demand for gas, petrol and heavier crudes and their products.
A positive is the commodity price boom which has and continues to boost demand for diesel fuel (especially in Australia and China).
US non-farm payrolls rose by 379,000 last month, after rising 166,000 in January. In December, payrolls fell for the first time in eight months. The market had forecast 182,000 jobs.
Though the unemployment rate fell to 6.2% last month from 6.3% in January, it continued to be understated by people misclassifying themselves as being “employed but absent from work.”
In Europe, Brent futures rose $US2.62, or 3.9%, to settle at $US69.36 a barrel. In New York, WTI crude rose $US2.26
For the week, Brent was up 5.2%, rising for a seventh week in a row for the first time since December, while WTI was up about 7.4% after gaining almost 4% last week.
Both contracts had jumped more than 4% on Thursday after the OPEC and allies, together known as OPEC+, extended oil output curbs into April, granting small exemptions to Russia and Kazakhstan.
The Baker Hughes oil rig count rose by one 310 and the total rig count also rose by one to 403.
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Gold dipped again, as did silver, iron ore faded but copper bounced on Friday.
Gold finished the week under $US1,700 an ounce and at a 9-month low.
That will mean the ASX gold sector won’t enjoy the same level of support this morning as will the rest of the market.
While the stronger US dollar played a big part in the weakness on Friday, it didn’t impact copper (or oil – see separate story) which rose by nearly 2.5% on the day
Comex gold lost 0.15% to $US1698.50 at settlement on Friday and a 9-month low $US1,683 in trading.
Gold is now more than $US290 an ounce under its all-time high of $US2.089 last August.
The dollar rose on the 379,000 nonfarm jobs in February, well above market expectations.
Meanwhile, the unemployment rate edged down to 6.2% from 6.3%. The 10-year Treasury yield traded flat at 1.56% after popping above 1.61% to hit a 2021 high following the employment growth.
Gold prices fell nearly 2%.
Comex copper settled at $US4.075 a pound in New York and ended after hours trading at $US4,10 a pound. That left down 0.05% but still up more than 16% year to date,
Copper hit a nine year high of just over near-decade high of $US4.375 on February 24 and sagged to just over $4 a pound last week before bouncing on Friday.
Silver fell as well, following gold lower but suffering a larger, 0.65% drop to end the week at $US25.295. Silver shed 5.6% in value over a rough week.
Iron ore prices fell on Friday to be down marginally for the week.
65% Fe fines delivered to northern China (from Brazil) eased $US3/70 a tonne to $US199.20 after hitting an all-time high of $US2020.90 a tonne on Thursday. It fell 20 cents a tonne over the week.
The price of 62% Fe fines delivered to Northern China (mostly from WA) fell $US3.87 a tonne to $US174.11 a tonne for a loss of $US1.67 a tonne over the week.
