U.S. Jobs Report Disappoints
May 7, 2021
The unexpected rise in gasoline stocks this week and lower implied demand for gas, as well as, maybe a slight shift in focus on India’s rising COVID cases gave the market some pause yesterday, and prices were lower. India reported a record 412,262 new COVID-19 cases and 3,980 deaths in the past 24 hours. The increase in gasoline stocks and lower implied demand was a little concerning as the outlook continues to be for robust demand as more people are vaccinated and more restrictions get lifted. Most traders and market analysis continue to call for record demand in the back half of this year so any near term pullback would be seen as corrective and temporary at this point in time.
An example to the above point about second half recovery and demand. Commerzbank sees WTI prices averaging $62 per barrel in 2021 and $67 per barrel in 2022. It expects the price of Brent crude to end the year at $70 per barrel. It forecast the 2021 Brent price at $65 per barrel. It said oil demand continues to recover and the inventory overhang is almost eliminated and added that there are signs of a supply deficit in the second half of the year.
Energy prices were also under some pressure as reports that OPEC + saw it over production jump to 3.316 million bpd from 3.027 million bpd in February. Russia and Iraq were the biggest over producers.
There seems to be a lot of chatter this morning about Iran and the nuclear negotiations and what that will all mean for Iran production. Iran has already been putting more barrels into the market as they have little concern that the US will do anything. At this time, I think the market has to assume that more barrel with be coming out of Iran and at some point, in time they will be back to producing nearly 3 million bpd. It is just a matter of when.
The US added just 266,000 jobs in April a disappointment to the Dow Jones estimate of 1 million new jobs. As the outlook for a strong economic recovery drives many of these markets this disappointing news might offer a temporary pause.