Oil rose slightly Friday after a strong U.S. jobs report, but finished lower for a second consecutive week amid growing concerns about bulging domestic oil inventories.
West Texas Intermediate futures, the U.S. oil benchmark, ended 0.2% higher at $61.94 a barrel on the New York Mercantile Exchange. Prices ended the week 2.1% lower, and Friday's close was just 13 cents above Thursday's one-month low of $61.81 a barrel.
Brent crude, the global oil benchmark, ended up 0.1% at $70.85 a barrel on London's Intercontinental Exchange. Oil prices gained more than 40% from Jan. 1 to late April after the Organization of the Petroleum Exporting Countries, or OPEC, and Russia agreed in December to cut production to reduce oversupply and boost prices. U.S. sanctions against Venezuela and Iran further tightened global supplies, pushing U.S. prices to a six-month high of $66.31 late last month.
But the months long jump in prices encouraged U.S. oil companies to keep pumping more oil, and U.S. crude-oil output hit a record-high 12.3 million barrels a day in the prior week. Texas alone is now producing more than all OPEC members except Saudi Arabia.
As a result, U.S. inventories of crude oil are now surging, with stockpiles increasing by more than 15 million barrels in just the past two weeks, to 471 million barrels, the highest total since September 2017. Those increases have caused oil prices to fall five of the past eight sessions, sliding 3.2% during the past two weeks.
“Oil prices were pummeled across the board,” said Dominick Chirichella, director of market insights at DTN, referring to recent price action after the string of weekly builds to in oil stockpiles.
That price decline, however, may prove bullish longer term, as OPEC is due to meet next month to decide whether to continue its production-cut deal. The selloff “is likely to embolden Saudi Arabia and its producing partners to maintain a high compliance level to the cut accord for the near term,” Mr. Chirichella said.
Oil prices found some support Friday morning after the U.S. labor market added more jobs than expected last month, according to the Labor Department. Nonfarm payrolls rose a seasonally adjusted 263,000 in April, while the unemployment rate ticked down to 3.6% last month, the lowest since 1969.
Will Rhind, CEO of Granite- Shares, an ETF issuer based in New York, said that while other economic reports have raised concerns of slower global growth, economies around the world are still growing, which should keep demand for oil healthy.
“In addition, at this point, it seems highly likely a U.S.- China trade agreement will be finalized soon,” Mr. Rhind said. Friday marked the start of tougher U.S. sanctions on Iran in which the Trump administration is no longer allowing countries to import Iranian oil without facing financial penalties. The goal is to end all Iranian oil exports.
“We're going to zero,” said Secretary of State Mike Pompeo late last month. Analysts said the sanctions are having an impact, though they may not literally halt all Iran exports, which were recently more than one million barrels a day.
“While the expiration of U.S. sanction waivers for countries importing Iranian crude is poised to drop Iranian exports by greater than 500,000 barrels a day over the near term, the market appears confident that Saudi Arabia will follow through on pledges to counter supply losses,” said Robbie Fraser, global commodity analyst at Schneider Electric.
The American Petroleum Institute, an industry group, is due to release its weekly report on U.S. oil inventories on Tuesday at 4:30 p.m. ET.
BY DAN MOLINSKI