Oil Rises to $88 Ahead of U.S. Jobs Report
The price of oil rose above $88 a barrel on Friday, after a 2 percent drop the day before, as attention turned from an ECB meeting that disappointed markets to the monthly report on U.S. jobs.
By early afternoon in Europe, benchmark crude was up $1.07 at $88.20 a barrel in electronic trading on the New York Mercantile Exchange. The contract dropped $1.78 to end Thursday at $87.13 in New York.
In London, Brent crude was up 60 cents at $106.50 on the ICE Futures exchange.
Oil slid Thursday after the head of the European Central Bank failed to take immediate action to overcome the region's debt crisis and provide new stimulus to the weak European economy. Six of the 17 nations that use the euro are in recession, which has reduced Europe's demand for crude.
ECB President Mario Draghi said last week that he would do "whatever it takes" to save the euro common currency. To many, that meant Draghi would announce measures after the central bank's policy meeting Thursday to spark borrowing and spending. But he didn't deliver, offering only the promise of a plan.
As markets recovered on Friday, oil prices edged higher. Crude was also supported by a weaker dollar, which makes oil cheaper and a more attractive investment for traders holding other currencies. The euro was up to $1.2282 on Friday from $1.2184 late Thursday in New York.
Markets are now turning their attention to the monthly U.S. hiring report due later Friday. The U.S. has created fewer new jobs in recent months as its economic recovery stumbled and the unemployment rate has remained above 8 percent.
"The markets are rebounding this morning on the belief that the U.S. employment report will be sufficiently poor to spur Fed action, after all," said the Kilduff Report edited by Michael Fitzpatrick. "There will be easing, but another trip to the precipice of economic calamity may well be required, yet again. We see 110,000 jobs being added, which may not be sufficiently poor."
Analysts at DBS Bank in Singapore said economists on average expect the U.S. added 100,000 new jobs in July, an improvement from about 80,000 in June. But that is still significantly below the level that would suggest the economy is picking up steam again.
Experts also noted the increasing difference between the contracts for Nymex, a U.S. oil benchmark, and Brent, which is oil sourced from the North Sea.
"Brent production is suffering as a result of maintenance work in the North Sea," said a report from Commerzbank in Frankfurt. "Fears of a conflict in the Middle East — both Israel and Iran appear to be readying themselves for an escalation of the situation — are likely to lend support to Brent in particular."
"That said, the very high price difference is not sustainable in the longer term," Commerzbank concluded.
In other Nymex energy trading, wholesale gasoline futures were down 0.08 cent at $2.8688 a gallon and heating oil added 1.7 cents to $2.8593. Natural gas was down 2.3 cents at $2.897 per 1,000 cubic feet.