Crude Oil Flat; Supply Concerns Prompt Weekly Gains By

By Peter Nurse — Oil prices traded largely flat Friday, weighed by disappointing U.S. jobs data, but still on course for hefty gains in the first trading week of the year as civilian unrest in Kazakhstan and production outages in Libya raised concerns about global supply. 

By 9:25 AM ET (1425 GMT), futures traded 0.1% lower at $79.37 a barrel and the contract rose 0.2% to $82.17. 

U.S. Gasoline RBOB Futures were up 0.3% at $2.3110 a gallon.

The U.S. economy posted fewer jobs than expected for a second straight month in December, with only 199,000 nonfarm payrolls recorded in December. That’s only half the expected 400,000 and a sharp contrast to the 807,000 gain in private payrolls reported in ADP (NASDAQ:)’s concurrent survey earlier in the week. 

However, both main contracts were still on track for gains of over 6% this week, with prices near their highest since late November.

President Kassym-Jomart Tokayev declared earlier Friday that order had largely been restored in Kazakhstan after Russia and allies sent troops into the former Soviet state to quell violent protests that erupted over fuel price increases.

That said, TCO, Kazakhstan’s biggest oil producer and a joint venture led by Chevron (NYSE:), confirmed Friday it has altered output levels, but declined to provide further details on the size of the adjustment.  

“Protests in Kazakhstan are … a worry for the oil market,” said ING, in a note. “Kazakhstan is a large oil producer. Kazakhstan is allowed to produce 1.59MMbbls/d under the OPEC+ deal in February.“

There was some relief from the news that a major Libyan export pipeline has returned to normal operations, but the historic underinvestment in the sector suggests that further outages are more than likely.

Additionally, freezing conditions in North America have disrupted crude oil flows, as oil production in Alberta, Canada, has reportedly slowed while freezing conditions are reportedly starting to have an impact on oil output in the Bakken region in North Dakota.

“North Dakota produced a little under 1.1MMbbls/d over the first 10 months of 2021 and so the impact from any disruption should be less significant than what the market witnessed in February last year with the big freeze in Texas,” added ING.

This all adds to concerns that the Organization of the Petroleum Exporting Countries and its allies, including Russia, a group known as OPEC+, is struggling to continue to raise oil output, having promised earlier this week to add a further 400,000 barrels a day in February.

Only two big producers in the world – Saudi Arabia and the United Arab Emirates – are currently able to pump more oil than they did two years ago, according to Goldman Sachs’ head of commodity research Jeff Currie.

Later in the session, traders will focus on the Baker Hughes’ drilling rig update as well as the CFTC crude speculative net positions.


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