Global oil prices jumped to a two-week high Friday as investors reacted to plans from the People's Bank of China to stimulate growth in the world's biggest energy market and a stronger-than-expected reading for U.S. job creation over the month of December.
U.S. crude prices have risen more than 13% since hitting a multi-year low of $42.53 on Christmas Eve, even as manufacturing sector data from major economies in Europe and Asia recorded sharp slowdowns in the final month of 2018. Analysts say markets are getting support from both a planned 1.2 million barrel per day production cut from OPEC members, which kicked in earlier this week, a bigger-than-expected fall in domestic stockpiles just prior to the Christmas holiday and reports that Saudi Arabia has slowed production over the final two months of last year.
"These developments have ensured that crude oil continues to trade in the same volatile manner that was seen towards the end of 2018," said Saxo Bank's head of commodity strategy Ole Hansen. "The uncertain demand outlook is creating a lot of headaches for producers who cannot just rely on the market to stabilise by cutting production."
"On that the basis we have seen an increased correlation between stock market moves and movements in crude oil," he added.
Brent crude contracts for February delivery, the global benchmark, were marked $1.40 higher from their Thursday close in New York and changing hands at $57.35 per barrel while WTI contracts for the same month, which are more tightly linked to U.S. gas prices, were marked $1.09 higher at $48.18 per barrel.
U.S. employers added 312,000 new jobs last month, the Labor Department said Friday, nearly double the Street consensus of 177,000 and well up on last night's revised 176,000 reading. Average hourly wages also rose, to an annual rate of 3.2%, while the headline unemployment rate bumped higher, to 3.9%.
China's Commerce Ministry said Friday that Deputy U.S. Trade Representative Jeffrey Gerrish will visit Beijing next week for two days of high-level trade talks as the damaging dispute continues to take its toll on the world's two biggest economies, both of which recorded notable manufacturing slowdowns at the close of last year.
News of the talk was followed at the close of trading by a decision from China's central bank to reduce the ratio of cash to loans that domestic lenders need to hold on their balance sheets, a move that will add around $220 billion to the nation's financial system as officials attempt to re-ignite growth in the world's second-largest economy.
Oil prices were given further support by data from the American Petroleum Institute Thursday that showed U.S. crude stockpiles fell by a larger-than-expected 4.5 million barrels in the week ending December 21, a figure that helped offset concerns stoked by the biggest decline in U.S. manufacturing sentiment, as measured by the ISM, in at least a decade.
Oil majors edged higher in European trading, however, with BP plc (BP) - Get Report rising 2.2% higher while domestically-listed rival Royal Dutch Shell plc (RDS.A) was marked 1.9% higher at £26.41 each.
Chevron Corporation (CVX) - Get Report was marked 1.7% higher at $110.48 each, a move that extends the second-largest U.S. oil major's ten day gain to around to around 10% while larger rival Exxon Mobil (XOM) - Get Report was 2.33% higher at $70.23 each.
Energy investors, however, are worried that a fall in oil demand will be compounded by record output from the world's largest producers, adding to a glut in global crude that will offset OPEC's planned production cuts.
The U.S. Energy Information Administration said last month that production from the country's seven biggest shale areas, including the Permian Basin, is likely to top a record 8 million barrels per day this year before rising to around 8.1 million in early 2019. That's likely to add to overall U.S. output, which hit a record 11.7 million barrels per day in the week ending December 7.