Light, sweet crude oil prices fell June 3 on the New York market on a combination of a higher rig count, weaker-than-expected job statistics, and a weakening dollar. Oil is traded in dollars and becomes cheaper for foreign buyers when the dollar falls.
The overall US rig count climbed during the week ended June 3 for the first time since Aug. 21, 2015, ending a 41-week decline, Baker Hughes Inc. reported (OGJ Online, June 3, 2016).
A 4-rig increase to 408 total rigs working was bolstered by a 9-unit jump in rigs drilling for oil—the first rise in 11 weeks.
The dollar’s value fell after a government report that showed May US jobs rose only slightly compared with what analysts had expected. The Wall Street Journal Dollar Index, which measures the dollar against a basket of 16 currencies, has declined 1.5% in recent days.
The US Department of Labor said nonfarm payrolls rose by 38,000 in May, the weakest performance since September 2010. The unemployment rate fell to 4.7% in May from 5% in April.
Previously, Federal Reserve officials suggested they could raise interest rates in June if the economy continues to improve. Investors said the latest jobs report gave them less confidence the Fed might increase the interest rate that soon.
US natural gas futures prices also declined on June 3, a day after a weekly government report estimated a gain of 82 bcf in gas storage levels for the week ended May 27 compared with the previous week.
The US Energy Information Administration showed gas levels in underground storage across the Lower 48 at 2.9 tcf as of May 27, up 82 bcf from the previous week. Stocks were 712 bcf higher than last year at this time, the Gas Storage Report said.
Raymond James analysts J. Marshall Adkins and John Freeman issued a note saying that the gas market remains oversupplied and will require substantial demand growth to reduce storage levels.
“This past year has been unusual in its warm-relative-to-normal weather pattern and its steady gas production,” Adkins and Freeman said, adding that “mild weather and a lack of supply curtailments” could lead to storage levels ending 2016 at near 4 tcf.
The NYMEX natural gas contract for July delivery dropped less than a penny to a rounded $2.39/MMbtu. The Henry Hub price was $2.31/MMbtu, up 1¢.
Heating oil for July delivery dropped 2 to a rounded $1.49/gal. The price for reformulated gasoline stock for oxygenates blending for July decreased 2.7¢ to a rounded $1.61/gal. Analysts said the weaker-than-expected jobs statistics lowered expectations for gasoline demand.
The August Brent crude contract on London’s ICE was down 40¢ to $49.64/bbl. The August contract was down 42¢ to $50.04/bbl. The June gas oil contract dropped $6.75 to $443/tonne.
OPEC’s basket of crudes price for June 3 was $45.73/bbl, up 15¢.
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