By Barani Krishnan
Investing.com -- What goes down, must also come up -- in oil's case, at least.
Crude prices jumped 4% Friday and double-digits on the week as oil bulls starved of gains from a four-month long selloff piled back into the market on this week’s production cut announced by OPEC.
With bringing Brent back to $100 per barrel appearing to be the first item on their clipboard, bulls pushed long and hard and nearly got there. The world benchmark for crude broke above $98 the first time since Aug. 31, rising 12% on the week.
West Texas Intermediate, the U.S. crude gauge, had an even more eye-popping gain of 17% on the week as it crossed $90 the first time since July 24.
“OPEC+ has done whatever it takes and is now awaiting to see what the reaction will be from world leaders,” said Ed Moya, analyst at online trading platform OANDA.
The “reaction” from the U.S. government, at least, could be to limit the amount of fuel that can be exported out of the United States — in a bid to stop gasoline prices from retracing their mid-June record highs of $5 a gallon. As of Friday, the gasoline price at U.S. pumps averaged around $3.80 per gallon.
OPEC+, which groups the 13-member Saudi-led Organization of the Petroleum Exporting Countries with 10 oil exporters steered by Russia, announced on Wednesday what was billed as a “deep” production cut of 2 million barrels per day.
But that figure was well below the 3.5-million-barrel daily shortfall in the group’s previously announced output target.
What’s more, there was no breakdown on where the reductions would come from — i.e. which countries would be cutting and how they would be doing so. The alliance had banked on the market to just swallow what it said and send prices back near the highs of the year. Oil bulls, predictably, have done just that.
WTI settled the day up $4.19, or 4.7%, at $92.84 per barrel. For the week, the U. S. benchmark was up 17%. Prior to this week, WTI had fallen 12.5% in September and 24% in the third quarter.
Brent settled Friday’s session up $3.50, or 3.7%, at $97.92. For the week, Brent rose 11%, after an 11% drop in September and third-quarter loss of 22%.
Phil Flynn, an energy analyst at the Price Futures Group and a well-known oil bull, however, said there was justification for the market rebound beyond the OPEC+ decision. “Crude oil supplies are 3% below the five-year average,” Flynn added.
If there was anything holding the market back from its true bullish potential, it had to be the much-awaited U.S. jobs data for September released by the Labor Department on Friday.
U.S. employers added 263,000 jobs in September, slightly above economists' expectations, while the jobless rate dipped to 3.5% from August's 3.7% in a continued challenge to the Federal Reserve's fight against inflation, the data showed.
The Dollar Index rallied for a third straight day on Friday as those long the greenback tried to reprise the 20-year highs from a week ago.
A strong dollar is anathema to dollar-denominated commodities, including crude, as it raises the transaction/acquisition costs for commodity traders using the euro and other currencies.
Moya, however, said the momentum in oil, for now, might overwhelm any upward trajectory in the dollar.
“A strong dollar is eating away at some of crude’s weekly gains, but that won’t have a lasting impact,” he said.