WTI steadies near $62 after rallying on U.S. employment data

Oil steadied near $62 a barrel in New York after signs of economic strength in the U.S. sent prices higher by the most in seven months on Friday.

The U.S. jobs report topped estimates last week, increasing confidence in the world’s biggest economy, giving a boost to the outlook for energy demand and driving benchmark crude prices up 3.2 percent on Friday. American oil explorers idled four rigs last week after six consecutive increases in drilling, easing fears over surging shale production. Prices were 0.4 percent lower Monday.

“Employment is the key driver of oil demand, as more people at work means more commutes and, in consequence, rising road fuel use,” said Norbert Ruecker, head of commodity research at Julius Baer Ltd. in Zurich.

Investors are starting to show some belief again in oil after growing increasingly concerned that U.S. crude producers may undermine efforts by the Organization of Petroleum Exporting Countries and its allies to curb output to drain a global glut. Still, America is pumping record amounts of crude and forecasts for even more output are keeping prices below the highs of January.

West Texas Intermediate for April delivery traded at $61.80 a barrel on the New York Mercantile Exchange, down 24 cents at 11:33 a.m. in London, after gaining $1.92 on Friday. Total volume traded was about 23 percent below the 100-day average.

Brent for May settlement fell 33 cents to $65.16 a barrel on the London-based ICE Futures Europe exchange. The contract climbed 3 percent to $65.49 on Friday. The global benchmark traded at a $3.48 premium to May WTI.

American explorers cut the number of rigs drilling for oil by four, the first decline since mid-January, Baker Hughes data showed Friday. That followed government data showing the U.S. added 313,000 jobs in February, the biggest increase since July 2016 and more than the median estimate of 205,000 new positions.

Still, fears over increasing U.S. production continue to weigh on producers and investors. Iran wants OPEC to work to keep oil prices at about $60 a barrel as an increase toward $70 will encourage shale oil output, the country’s Oil Minister Bijan Zanganeh said, the Wall Street Journal reported.

Some of the market’s fears were echoed in money managers’ short-selling position. Hedge funds boosted bets on falling WTI prices by the most this year after American production surged to record levels, according to the U.S. Commodity Futures Trading Commission.

© 2018 Bloomberg L.P