By Geoffrey Smith
Investing.com -- Crude oil prices reversed overnight losses to be trade higher by mid-morning in New York on Thursday, after a stronger-than-expected release of jobless claims data reassured the market that the U.S. economic recovery is still on track - even though the headline numbers flattered the underlying trend.
By 10:20 AM ET (1320 GMT) U.S. crude futures were up 0.2% at $42.30 a barrel, while the international benchmark Brent was up 0.6% at $45.45 a barrel.
Gasoline RBOB Futures were up 1.3% at $1.2385 a gallon.
U.S. crude had hit a five-month high on Wednesday after government data showed a drop of more than 7 million barrels in U.S. inventories. However, they had slipped in Asian and European trading on the back of some poor reported earnings and amid lingering concerns about the fate of the next package of economic relief measures currently being thrashed out in Washington DC. Enthusiasm was also tempered by a filing from Exxon Mobil (NYSE:XOM) warning that up to one-fifth of its reserves may not be economically viable if prices stay at depressed levels.
The market regained its upward momentum on Thursday after the weekly report on jobless claims appeared to corroborate the picture created by the inventories numbers: initial claims for unemployment benefits fell to 1.18 million, their lowest since the first lockdown-driven surge in claims at the end of March. Continuing claims also fell to their lowest since April.
However, the number of people claiming under all government programs – including the Pandemic Unemployment Assistance scheme – actually rose slightly by some half a million to 31.31 million. That makes the numbers less easy to interpret than the headlines.
The upbeat U.S. news – coupled with earlier strong economic data out of Europe, where industrial orders leaped in Germany and production rebounded in Italy – overshadowed signs of weakening discipline among the so-called OPEC+ group of producers in July.
Energy Intelligence estimated that the group missed its targets for output restraint in July, a month after dramatically exceeding its targets in June thanks to voluntary additional output cuts from Saudi Arabia. The biggest overproducer, according to EI, was still Iraq.
According to S&P Global Platts, Iraq has promised to cut output further in August to compensate for past overproduction. Whatever discount OPEC attaches to Iraq's promises, the gesture is likely to reduce the risk of a more damaging unraveling of the agreement.