West Texas Intermediate crude surged to the highest level in a month as U.S. employment rose more than forecast in April, stoking speculation that demand in the world’s biggest oil-consuming country will increase.
Prices capped a second weekly advance after the Labor Department said nonfarm payrolls grew by 165,000 workers last month. Economists surveyed by Bloomberg had expected a gain of 140,000. The unemployment rate unexpectedly declined to a four-year low of 7.5 percent. Crude also climbed as U.S. stocks rallied.
“The oil market has broken out, and the jobs report is the biggest catalyst,” said Jeff Grossman, president of New York-based BRG Brokerage and a New York Mercantile Exchange floor trader. “The stock market is strong, and everything is going higher.”
West Texas Intermediate crude for June delivery jumped $1.62, or 1.7 percent, to $95.61 a barrel on the Nymex, the highest settlement level since April 2. The volume of all futures traded was 32 percent higher than the 100-day average for the time of day. Prices are up 2.8 percent this week.
Brent crude for June settlement advanced $1.33, or 1.3 percent, to $104.19 a barrel on the London-based ICE Futures Europe exchange. Volume was 36 percent higher than the 100-day average.
Brent’s premium to West Texas Intermediate crude dropped to as low as $8.52. It closed at $8.86 Thursday, the narrowest based on settlement prices since Dec. 30, 2011.
“The jobs report is inspiring, and it’s bullish for oil,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “With jobs numbers being strong, you just can’t be short on oil. The market is going to be looking to better demand in the U.S.”
The U.S. used 18.8 million barrels a day of oil in 2011, or 21 percent of the world’s consumption, according to BP Plc’s Statistical Review of World Energy.
“People had been a bit nervous about oil demand and economic growth,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Mass. “This report gives people a sense that maybe the U.S. economy will not pause, but instead may accelerate in the second quarter.”
Total oil demand in the U.S. fell 3.6 percent last week to 17.9 million barrels a day, the Energy Information Administration reported Wednesday.
Crude inventories gained 6.7 million barrels to 395.3 million, the highest level in 82 years, according to the EIA, the Energy Department’s statistical arm.
“U.S. oil inventories are very high, and demand is still poor,” Flynn said. “With this improvement in the jobs number, there is an expectation that demand is going to perk up.”
West Texas Intermediate crude prices might drop next week, a Bloomberg survey showed. Sixteen of 34 analysts and traders, or 47 percent, forecast futures will decline through Friday. Twelve respondents, or 35 percent, projected a gain, and six said there would be little change.
Information for this article was contributed by Alexander Kowalski of Bloomberg News.
Business, Pages 28 on 05/04/2013