Oil futures: Brent poised for $4/b weekly fall as US payroll report, China weighs

6 Aug 2021

Quantum Commodity Intelligence - Crude oil futures fell Friday, with choppy trade seeing prices trend downwards following the release of more key US jobs data, and leaving futures headed for the steepest weekly losses since the end of the first quarter as demand worries continued to dominate.

Front-month October ICE Brent futures were trading at $70.91/barrel (1608 GMT), compared to Thursday’s settle of $71.29/b and down more than $4/b from Friday's settle of $75.41/b.

At the same time, September NYMEX WTI was trading $68.50/b, versus Thursday’s settle of $69.09/b and last Friday's close of $73.95/b.

Prices fell from intraday highs prior to the release of what was largely positive US July non-farm payroll data.

There are concerns that the Fed could ease stimulus measures as jobs growth continues to beat forecasts, but a rising dollar also weighed on oil.

New unemployment claims data for the US released Thursday had shown a second week of decline, while ongoing claims hit a pandemic low, helping to trigger gains for both equities and oil prices, alongside separate data indicating an expanding US trade deficit.  

"A positive jobs report [Thursday] in the US sparked the risk-on tone, while solid corporate earnings also helped ease concerns that the global economy is faltering," said Daniel Hynes, senior commodity strategist at ANZ, referring to Thursday's price bounce.

Meanwhile, lockdowns and travel restrictions across China remain the overriding concern for the short-term, with demand for gasoline, jet and diesel already suffering.

Covid-19 cases continue to grow, albeit from a very low base.

The world’s second-largest oil consumer recorded another 80 locally transmitted cases of COVID-19 on Friday, mostly in the eastern city of Yangzhou in Jiangsu province, where the highly contagious delta variant spread among airport workers in the provincial capital of Nanjing.

The market could be poised for gains though if China demand concerns prove to have been overdone.

"In mid-July, the rapid spread of the Delta variant in western industrialised countries had already caused prices to fall sharply, though this was reversed in a matter of days when the fears about demand ultimately proved unfounded," noted Commerzbank's Carsten Fritsch in a research note.

"Assuming the measures in China are only temporary and local, the situation should be no different there, meaning that concerns about a significant cooling of demand should evaporate again."