Crude oil futures extend retreat in wake of weak US job report

Crude oil futures extended a decline in mid-morning trade in Asia Sept. 6 after a weaker-than-expected US employment report heightened near-term demand concerns.

At 10:49 am Singapore time (0249 GMT), the ICE November Brent futures contract was down 99 cents (1.36%) from the previous close at $71.62/b, while the NYMEX October light sweet crude contract was down 91 cents (1.31%) at $68.38/b.

Both markers fell after US Department of Labor data released late Sept. 3 showed nonfarm payrolls rose by 235,000 jobs in August, down sharply from the 1.05 million increase reported in July and well below market expectations of a rise of more than 700,000.

"I think sentiments are largely following through from the US August jobs report, which underperformed expectations by a wide margin," IG market strategist Yeap Jun Rong told S&P Global Platts Sept. 6. "This highlights that COVID-19 is having a larger near-term impact on recovery than many expected."

ANZ Research analysts in a note said the deceleration in US hiring raised concerns that the delta variant was having an impact on the US economy that would ultimately impact demand.

Meanwhile, producers in the Gulf of Mexico were continuing to aim to bring production capacities back online in the wake of Hurricane Ida. While operations mostly escaped major damage from the storm, there has been minimal recovery in Gulf of Mexico oil output to date, analysts said Sept. 6.

The US Bureau of Safety and Environmental Enforcement reported 82.72% of Gulf of Mexico crude output remained offline Sept. 3, down from 85.89% reported Sept. 5.

"A supporting factor for crude oil this week would be the carry-over effects of supply destruction caused by Hurricane Ida and may keep prices elevated over the week," Philip Futures analysts said in a note Sept. 6.

With 1.7 million b/d of offshore production yet to come back onstream and most of Louisiana's refining industry debilitated by flooding, US crude and product stockpiles were expected to fall, they added.