NEW YORK: Oil prices gained over 1% on Friday as the dollar slid on a stronger-than-expected US jobs report, but both crude benchmarks were set to end the first week of the year lower due to global recession concerns.
Brent futures rose 80 cents, or 1.0%, to $79.49 a barrel by 12:33 p.m. EST (1733 GMT), while US West Texas Intermediate (WTI) crude rose 96 cents, or 1.3%, to $74.63.
For the week, both Brent and WTI were down about 7% as energy markets started 2023 with biggest weekly dive to start a year since 2016. Both benchmarks had gained about 13% during the prior three weeks.
The US dollar erased earlier gains after US jobs data showed employers added jobs at a solid clip in December.
A weaker dollar can boost demand for oil, as dollar-denominated commodities become cheaper for holders of other currencies.
“This was a very good (US jobs) report for oil as the labor market remains robust and wage pressures are coming down, which will allow the (US Federal Reserve) to stop hiking fairly soon,” said Edward Moya, senior market analyst at data and analytics firm OANDA.
Atlanta Federal Reserve (Fed) President Raphael Bostic said the latest US jobs figures are another sign that the economy is gradually slowing and should that continue the Fed can step down to a quarter percentage point interest rate hike at its next policy meeting.
“For oil to keep this rally going, energy traders need to see China showing progress with their current COVID outbreak,” OANDA’s Moya said.
Stock markets in China, the world’s largest crude oil importer, logged a five-day winning streak on Friday on investors’ expectations that the economy would soon emerge from its COVID woes and stage a robust recovery in 2023.
But, more countries around the world are demanding visitors from China take COVID tests, days before it drops border controls and ushers in an eagerly awaited return to travel for a population that has been largely stuck at home for three years.
“The oil market might be regaining some composure following the bloodbath earlier this week, but the upside potential remains limited, at least in the near term. The economic outlook is clouded,” PVM analyst Stephen Brennock said.
Euro zone inflation tumbled last month but underlying price pressures are still rising and economic growth indicators are surprisingly benign, suggesting that the European Central Bank will keep raising interest rates for months to come.
India’s government expects economic growth to slow in the financial year ending March, as pandemic-related distortions ease and pent-up demand for goods levels out going into 2023.
The world’s top crude exporter, Saudi Arabia, lowered prices for the Arab light crude it sells to Asia to its lowest since November 2021 amid the global pressures hitting oil.
In the United States, meanwhile, Colonial Pipeline said it expects to restart its Line 3 products pipeline by the weekend as it works to repair a piece of equipment in Virginia that led to its shutdown this week.