U.S. West Texas Intermediate and international-benchmark Brent crude oil futures surged for than 3.50% on Friday, hitting a multi-year high, following Thursday’s decision by OPEC and its allies not to increase supply in April and a stronger-than-expected U.S. labor market report that raised expectations for higher future demand.
OPEC+ Says No to Output Hikes
On Thursday, crude oil futures spiked about 4% higher after OPEC and its allies extended oil production curbs into April, while granting slight exemptions to Russia and Kazakhstan.
The move caught many traders by surprise, which may have contributed to the exaggerated rally. A combination of aggressive short-covering and fresh fund-driven buying may have been behind the price surge.
Earlier in the week, crude oil prices were pressured as investors bet OPEC and its allies would raise output between 500,000 and 1,500,000 barrels per day. Some were even looking for Saudi Arabia to do away with its voluntary cut of 1 million bpd.
Instead, OPEC+, led by Saudi Arabia, left its production cuts in place through the end of April, forcing the major crude oil traders to revise their price expectations upward.
Demand Outlook Turns More Optimistic Amid US Jobs Surge
Crude oil futures received an additional boost early Friday after a government report showed the U.S. economy created more jobs than expected in February.
U.S. jobs increased more than expected in February amid falling new COVID-19 cases, quickening vaccination rates and additional pandemic relief money from the government, putting the labor market recovery back on firmer footing and on course for further gains in the months ahead.
Non-Farm Payrolls surged 379,000 jobs last month after rising 166,000 in January, the Labor Department said on Friday. Economists were looking for an increase of 210,000 jobs.
The report was a strong indication that the economy was moving closer to pre-pandemic levels, leading to higher expectations for stronger demand for crude.
US Drillers Add Oil and Gas Rigs for Second Week in a Row: Baker Hughes
U.S. energy firms this week added oil and natural gas rigs for a second week in a row as crude prices soared to their highest levels since 2019.
The oil and gas rig count, an early indicator of future output, rose one to 403 in the week to March 5, still its highest since May, energy services firm Baker Hughes Co said in its closely followed report on Friday.
The total rig count has increased for the past seven months after dropping to a record low of 244 in August, according to Baker Hughes data going back to 1940.
Separately, oil rigs rose one to 310 this week, their highest since May, while gas rigs, were unchanged at 92.
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