By Geoffrey Smith
Investing.com -- Crude oil prices held on to most of their overnight gains in early trade in New York on Wednesday, after data suggesting that job-shedding in May and June had not been as severe as feared bolstered confidence in the resilience of U.S. demand.
Private payrolls processor ADP said the U.S. private sector added 2.369 million jobs last month. While that was below expectations, the company also sharply revised down its estimate of job losses in May, leaving the net job count, on balance, higher than assumed.
Crude prices dipped on the first headline figure but recovered some of their losses after reassessing the broader picture. By 9:15 AM ET (1315 GMT), U.S. crude futures were up 1.5% at $39.87 a barrel, having earlier traded as high as $40.58 a barrel. The international benchmark Brent was up 1.3% at $41.80 a barrel.
As with the official employment report, which has been moved up a day to Thursday to avoid clashing with the July 4th holiday, ADP’s data only cover events until the middle of the previous month, hence the more up to date numbers on labor demand will be the weekly jobless claims, which are due on Thursday as usual.
The unclear picture from the labor market puts more of an onus on the ISM manufacturing survey and the government’s weekly report on oil inventories at 10:30 AM ET to provide clarity about the strength of U.S. demand. American Petroleum Institute numbers released on Tuesday had shown a drop of 8.16 million barrels in crude stocks, far more than expected.
“In the U.S., the recovery is a lot more precarious than people had hoped or planned it to be,” Citigroup’s head of commodity research Ed Morse told Gulf Intelligence in an online video interview earlier Wednesday.
Morse said he doesn’t expect world demand to return to late-2019 levels before the end of next year. Despite that, he said he expects the U.S. shale sector to pick up, arguing there’s “very little downside” from last week’s multi-year low for drilling rigs and pointing to an increase in fracking crew activity already taking place.
“Certainly at $35-$40 WTI, there is profitable oil to be exploited,” Morse told GI.
Further afield, Petroleum Argus reported that Libya had managed to restart production at one of its smaller fields, although its larger, export-oriented fields remain blockaded by civil war. Elsewhere, the market has absorbed with little fuss signalling from the OPEC+ bloc, reported by Reuters, firming speculation that the group will go ahead with its planned relaxation of output restraint at the end of the month. Under current plans, the bloc intends to return 2 million barrels a day of output to the market in August, out of the 9.7 million b/d it cut in May.