Oil rose on Thursday after two straight days of losses, as initial US jobless claims fell to a near four-year low last week, raising hopes that an improving labour market would lift demand for energy. Data from the US Labour Department showing first-time claims for state unemployment benefits fell to the lowest level since April 2008 gave US prices an early boost, with further strength coming from short covering ahead of the three-day holiday weekend.
In recent months, new jobless claims have fallen sharply, boosting hopes that the end of a long stretch of heavy layoffs will lead to more hiring, ultimately boosting demand for motor fuel and other energy products. In London, ICE Brent crude for May delivery settled at $123.43 per barrel, up $1.09, climbing back from the session low of $121.82. For the week, the contract rose 55 cents, after three consecutive down weeks.
US May crude settled at $103.31 a barrel, gaining $1.84, after setting a session high at $103.40. For the week, the contract rose 29 cents, ending three successive weeks of losses. "The move higher on crude has also liquidated the gasoline crack, which hit a high of more than $40 yesterday, but has fallen to $36.75 today," added Tony Rosado, options broker ag GA Global Markets in New York.
Brent crude's premium against US crude narrowed to $20.12 at the close, after hitting $21.72 on Wednesday, the widest since October, supported by US government data showing oil stockpiles at the US delivery hub in Cushing, Oklahoma, rose sharply last week to hit their highest level since May 21.
Total US crude oil inventories jumped by more than 16 million barrels over the past two weeks, the biggest increase since March 2001. The rise eased concerns about supplies after a string of outages from the North Sea, South Sudan, and Syria as well as the potential loss of Iranian exports due to US and EU sanctions sent Brent prices up 15 percent this year. Thursday's Brent crude trading volume was down 5 percent while US crude dealings fell 25 percent, both based on their 30-day average, according to Reuters data.
In early trade, oil futures rose on supply disruption fears on news that a major Chinese ship insurer will halt indemnity coverage for tankers carrying Iranian oil, a move that could seriously complicate Iran's oil exports after a European Union embargo comes into force on July 1.
China is the top buyer of Iranian crude and the insurance move is the first sign Chinese refiners may struggle to obtain shipping and insurance coverage the4y nee3d to keep importing from Opec's second biggest producer. Japanese refiners also plan to cut crude imports from Tehran yet again in April as they shy away from renewing annual contracts.
Iran's crude oil production could fall 1 million barrels per day by the end of June to below $2.5 million bpd, J.P. Morgan said in a note to clients, saying refiners have cut oil demand from the Islamic Republic faster than previously expected. Adding to supply disruption worries, explosions had temporarily shut on Thursday both of the pipelines bringing about a quarter of Iraq's crude exports from Kirkuk to the Turkish port of Ceyhan on the Mediterranean. News that a rocket fired from Egypt's Sinai desert struck the southern Israeli resort of Eilat on Thursday also fuelled the early rise in oil prices, traders said.
"Geopolitical and supply risk worries are pushing oil prices higher ahead of a three-day holiday weekend," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut. A report that Royal Dutch Shell will cut production from the Mars field, a major supplier of sour crude from the Gulf of Mexico, according to trading sources, also added to supply uncertainties, particularly for US crude.
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