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Crude oil futures edge higher on US jobs report; Iraq's compensation cuts

  • Author
  • Jia Hong Ong
  • Editor
  • Norazlina Jumaat
  • Commodity
  • Oil

Singapore — 0225 GMT: Crude oil futures were marginally higher in mid-morning Asian trade Aug. 7 as optimism over a better-than-expected US jobs report and pledged compensation cuts by Iraq buoyed the market despite the growing COVID-19 case counts worldwide.

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At 10:25 am Singapore time (0225 GMT), the ICE Brent October crude futures was up 6 cents/b (0.09%) from the August 6 settle at $45.15/b, while NYMEX September light sweet crude contract was up by 4 cents/b (0.1%) at $41.99/b.

The global crude complex found strong support this week on the back of a larger-than-expected 7.37 million barrels drawdown in US commercial crude inventories as well as improvement in US factory orders for June and manufacturing PMIs in July.

This slew of positive economic data allowed the Brent marker to break out of its $45/b resistance level, while WTI was also able to settle above $42/b.

Further support was extended to the market over the state of the US economy after US initial jobless claims for the week ended Aug. 1 was reported at 1.186 million, lower than analysts' expectations of around 1.4 million and the 1.435 million figure reported in the previous week, US Labor Department data released on Aug. 6 showed.

This snapped a two-week uptrend of rising claims that had sown doubt regarding the strength of the US economic recovery. Investors will be looking to fresh cues from the official US non-farm payroll data for July due later today.

Meanwhile, Iraq had pledged to cut an extra 400,000 b/d in August to compensate for overproduction in the previous three months, as it tries to meet quotas under the OPEC+ supply agreement, S&P Global Platts reported earlier. This is positive for the global supply and demand fundamentals, especially as the group had begun to ease their output curbs to 7.7 million b/d in August.

However, the rapidly rising number of COVID-19 case counts worldwide continued to weigh heavily on market sentiments, capping further gains in the global crude complex. Global COVID-19 cases stand at 18,986,629, on track to breach the 19 million mark, latest data from John Hopkins University showed.

The number of daily infections worldwide had also climbed back up to 271,164 on Aug. 5, after four consecutive day of declines that culminated in a 3-week low of 202,486 cases on Aug 3.

Furthermore, rising geopolitical tensions between US and China remains a key concern.

"Given Asia's traders unfortunate predisposition to US-China tensions ahead of the August 15 trade talks, I expect Asia oil market activity, barring a big headline, could remain muted as it has been the past few days, but even more so ahead of the US Non-Farm Payroll report," Stephen Innes, chief global markets analyst at AxiCorp, said in a note Aug. 7.