Brent crude held above $105 a barrel today and was on course for its strongest weekly gain in a month, ahead of key US jobs data that could bolster confidence in recovery in the world’s largest oil consumer.
The United States is expected to have created more jobs as its economy recovers, lifting the outlook for fuel demand. But such news could also strengthen the greenback and make dollar-denominated commodities like oil more expensive for holders of other currencies.
"Tonight will be a good test of the residual interest in oil," said Michael McCarthy, chief market strategist at CMC Global Markets in Sydney. "Oil should rise because of the broader economic performance."
Brent crude for August delivery had dropped 5 cents at $105.49 by 6.45am , after settling down yesterday for the first time this week as supply concerns in the Middle East eased following the ouster of Egypt’s president. Front-month prices have gained 3.2 per cent so far this week, the largest weekly rise since the first week of June.
US crude futures fell 23 cents to $101.01 a barrel, but remained on track for their biggest weekly climb since April after closing at a 14-month high on Wednesday. There was no settlement yesterday due to a holiday in the US.
“With technical support and stronger fundamentals, there is no reason to be selling oil,” McCarthy said, pointing to Wednesday’s data that showed a large drawdown on US crude stockpiles last week.
West Texas Intermediate (WTI) crude futures could consolidate and then test resistance levels between $106 and $108 a barrel, he said.
As WTI raced ahead, Brent’s premium to the US benchmark fell to its lowest since December 2010 on Wednesday.
Clear signals of looser policy ahead from central banks in the UK and Europe yesterday may lure investors back to riskier assets such as oil, he said.
The toppling of Egyptian president Mohamed Mursi divided the Middle East , with Tunisia's ruling Islamists denouncing it as a coup while Gulf Arab leaders celebrated.
"We do not expect the political situation, even in flux, to undermine oil supply or transit in Egypt, " BNP Paribas analysts said in a note.
Reuters
