Oil prices slightly advanced on Friday and were expected to post their first positive week in five weeks as the outlook for the US economy improved, easing demand concerns and potential disruptions from geopolitical tensions in the Middle East.
October contract Brent crude oil futures climbed 0.08% to $79.22 per barrel, while the US West Texas Intermediate crude futures expiring in September increased 0.18% to $76.33 per barrel.
The global and US benchmarks are on track for a weekly gain of over 3% after a seven-month low and four weeks of being weighed by prospects of a recession in the world’s largest economy and a string of muted data from top oil importer China.
Prices found support in China’s consumer price index (CPI) rising to 0.5% year-over-year (YoY) in July from a 0.2% growth in the month earlier, indicating some progress in the country.
Risk premium in crude also surged after Ukraine’s unexpected attack on Russia, which marked the largest incursion since the war between the two countries started in February 2022.
Potential retaliation from Iran against Israel helped maintain the risk premium as well. Israel’s airstrikes on the Gaza Strip continued Thursday, with Palestinian medical personnel reporting at least 40 new casualties resulting from the country’s fight with the Iran-backed Hamas military group.
US Labor Market Sentiment Improves on Fewer Jobless Claims
Oil prices recovered as market fears of a US recession abated after data from the Labor Department showed that jobless claims dropped last week in a positive sign for the country’s labor market.
Initial claims for unemployment benefits lost 17,000 to a seasonally adjusted 233,000 for the week ending August 3, their biggest slide in around 11 months.
The reading suggested that concerns over the decline of the US labor market may not be as severe as previously speculated.
Jobless claims have stayed high for most of 2024, but only to a moderate extent. The recent 250,000 rise has been due to disruptions from Hurricane Beryl and summer shutdowns in automobile plants.
The slump led the US dollar higher against major peers on Thursday, returning above 103.00. A stronger greenback can decrease oil prices as foreign buyers pay more for their dollar-denominated crude. The greenback was trading 0.04% lower at 103.17 on Friday.
