Oil Up Again But in Slower Advance Before U.S. Jobs Report

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By Barani Krishnan

AiVIF.com -- Oil rallied for a fourth day in a row after a production cut announced by OPEC+. But the market’s advance slowed as the dollar and bond yields remained robust ahead of Friday’s jobs report for September — which, depending on its strength, could result in another jumbo-sized rate hike by the Federal Reserve next month.

New York-traded West Texas Intermediate settled up 69 cents, or 0.8%, at $88.45 per barrel. For the week though, it was up almost 12% after running up four straight days since the start of October.  WTI had fallen 12.5% in September and 24% in the third quarter.

Brent, the London-traded global benchmark for oil, settled up $1.05, or 1.1%, at $94.42 per barrel. For the week, Brent was up almost 8%, after an 11% drop in September and third-quarter loss of 22%.

Economists are expecting the Labor Department to report 250,000 new jobs in its September non-farm payrolls report. The unemployment rate is expected to hold steady at 3.7% while wage growth is forecast to remain elevated.

Investors are assessing the likelihood of another 75 basis-point rate hike at the Fed’s November meeting.  The Fed’s policy rate is now in the 3.00%-3.25% range, a full 3 percentage points higher than where it was at the start of 2022. 

Charles Evan, president of the Chicago Fed, affirmed on Thursday the central bank’s target of adding another 125 basis points to rates by the year-end. “The next meeting will decide whether to use 50 or 75 basis points,” Evans said, referring to the Nov. 2 meeting of the FOMC, the policy-making Federal Open Market Committee of the Fed.

Rate hikes are anathema to markets, and any rally in the dollar, especially, tends to hurt demand for dollar-denominated commodities such as crude from buyers using other currencies.  

“A strong dollar is capping crude’s gains today and it looks like we could see crude continue to consolidate until tomorrow’s NFP report,” said Ed Moya, analyst at online trading platform OANDA.

The Dollar Index, which pits the greenback against the euro, yen, pound, Canadian dollar, Swedish krona and Swiss franc, rose for a second day in a row Thursday, showing signs of reprising recent 20-year highs if Friday’s job numbers turn out to be as robust as expected.

The benchmark 10-year Treasury note was also up, egging the dollar higher.

Oil prices jumped on Wednesday as OPEC+ announced what was billed as a “deep” production cut, although the so-called reduction of 2 million barrels per day was even below the 3.5-million-barrel daily shortfall in the group’s previously announced output target.