Oil prices rose today, as strong US employment data fed into optimism that the market may have finally bottomed out.
Brent crude, the global benchmark, rose 1.4 per cent to $37.59 per barrel this morning, putting it on course to end the week with a gain of more than five per cent.
Meanwhile, West Texas Intermediate crude, the US benchmark, swelled 1.1 per cent to $34.95.
Official figures from the US’ statistics bureau showed US job openings rose to 242,000, smashing expectations of 195,000, and helping to allay fears that the world’s largest economy risks slipping into a recession.
Earlier today, data from the Energy Information Administration showed US oil production fell for the sixth consecutive straight week to 9.08m barrels per day last week. However, inventories hit a new record of 517.98m barrels.
Many analysts are expecting US oil production to tail off this year, as banks become increasingly reluctant to make loans to the country’s cash-strapped shale producers.
Despite proving more resilient than expected, Shale producers are starting to succumb to low oil prices, which have fallen around 70 per cent since June 2014.
“The tight credit market will make it difficult for US shale producers to refinance upcoming debt and we may see an accelerated decline in U.S. oil production in 2016-17,” ANZ said in a note.
Yesterday, Nigeria’s oil minister Emmanuel Kachikwu said that the second meeting of the Organization of Petroleum Exporting Countries (Opec) and non-Opec producers will take place in Russia on 20 March, where they’ll continue talks on freezing oil production.
It comes after De facto Opec leader Saudi Arabia, Russia, Qatar and Venezuela agreed a preliminary production cut deal in Doha last month.
However, Iran has vowed to continue pumping more oil, as it seeks to regain the market share lost during years of economic sanctions.
“We’ve had another good week, the market has been toying with resistance around the $37.50 area in Brent. We had a break above but it failed to hold — to me it indicates we could be in a Friday afternoon profit mode,” Saxo Bank’s head of commodities research Ole Hansen said.
“The psychology seems to have turned in the market and although we may see some profit-taking into the weekend, we potentially could still be moving higher next week.”
U.S. crude breached the $35 per barrel level earlier this week, but a settlement above that price would set up markets for another move higher, Again Capital founding partner John Kilduff told CNBC.
“It’s a technical trade here,” he said. “Employment data was strong, and that speaks to strong gasoline demand we’ve been seeing.”
Charts for Brent and WTI showed Relative Strength Index (RSI) at above 60, heading toward the overbought level of 70. RSI levels spiked as crude prices jumped more than 35 percent from 12-year lows hit less than 2 months ago.