May 6 (UPI) — Crude oil prices were swinging heavily early Friday as traders balanced strong U.S. labor figures against faltering optimism surrounding an OPEC balancing act.
The loss in crude oil prices approached 5 percent in Thursday trading as expectations about the effectiveness of an effort by the Organization of Petroleum Exporting Countries to balance the market through coordinated declines turned negative.
Ole Hansen, the head of commodity strategy at Saxo Bank, said in an emailed note that crude oil prices have fallen beneath the floor established in November when OPEC began coordinating the deal. There’s limited upside potential because there are few signs that U.S. oil production will fade, gasoline demand is lower in the United States, the world’s leading economy, and China’s economy is starting to slow down. Meanwhile, Libya, an OPEC member exempt from the production deal, put an extra 500,000 barrels per day on the market last week after reopening its largest oil field.
And while actual production figures from OPEC members are lower, what’s showing up on the market paints a different picture.
“OPEC’s production cut efforts have been impacted by signs of shipments from producers not slowing accordingly,” Hansen said.
The U.S. energy sector continues to show strength. Baker Hughes in its weekly report on rig counts, a metric for exploration and production, surged in the United States by more than 8 percent between March and April.
Crude oil prices were moving in volatile territory in early Friday trading, shifting between modest gains and steep losses before the start of U.S. trading. The price for Brent crude oil was down 0.1 percent to $48.34 about a half-hour before the opening bell. West Texas Intermediate, the U.S. benchmark for the price of oil, was down 0.3 percent to $45.39 per barrel.
Oil prices may be taking a cue from the U.S. labor sector, which found total non-farm payrolls increased by 211,000 in April. A bright spot in the U.S. economy, the highly anticipated April jobs report follows a preliminary estimate for the first quarter that growth in gross domestic product was less than 1 percent.
Wages in the United States improved slightly from the previous month, though the Labor Department reported the number of long-term unemployed — those without work for 27 weeks or more — was unchanged in April. That pool accounts for about a quarter of the total unemployed.