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Crude Prices Surge in Week, but Jobless Figures May Dampen Rise

Oil Market Summary for 03/29/2010 to 04/02/2010

In a week shortened by a holiday, crude oil futures reached an 18-month high, but U.S. jobless data released on Friday while commodities markets were closed may temper enthusiasm when markets reopen on Monday.

The U.S. economy added 162,000 jobs in March, the biggest gain in three years. Although the headline unemployment rate remained at 9.7% and the March figures were buoyed by temporary hires at the Census Bureau, the positive showing prompted some analysts to suggest the Federal Reserve may consider raising interest rates.

The dollar gained in Friday currency trading, partly on interest-rate speculation. Also, U.S. Treasuries declined following the jobless data, pushing yields up to their highest levels in more than nine months, in another sign that some investors see a chance of the Fed acting more quickly on interest rates. Bond markets are usually closed on Good Friday but opened for a morning trading session to react to the unemployment figures.

 The benchmark West Texas Intermediate settled at just below $85 a barrel on Thursday, at $84.87, after closing Wednesday at $83.76 to mark the fifth consecutive quarter of gains for oil prices. The decisive move above $80 came in the same week as OPEC officials reiterated their conviction that oil prices should stay in the $70 to $80 a barrel range.

Thursday’s close was the highest since October 2008. Positive economic reports from around the world were bullish for oil demand, analysts said. While some thought crude might be poised to break out beyond $85, others cautioned that oil has met resistance in recent months as it neared that threshold. The benchmark oil contract closed at $80 in the previous week.

The belief that the Fed will hold interest rates low has supported the rise in oil prices. But even though the U.S. jobless figures were bullish for the economy, the prospect of higher interest rates would dampen expectations for the economy and for oil demand. By the same token, a dollar boosted by interest-rate expectations would also dampen any rise in oil prices.

Wednesday’s gain in oil prices came in the face of ever higher oil inventories, as the Energy Information Administration reported a gain of 2.9 million barrels on the week. Gasoline inventories also increased, against market expectations of a decline.

By. Darrell Delamaide

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  • Anonymous on April 06 2010 said:
    Good summary, Darrell. Looking elsewhere I saw that the oil price has touched $86/b. How high is it going to go?
    Is it going to reach 90 this month, and 100 during the merry month of May? For all the good it will do, now I understand why President Obama gave the signal to start offshore exploration again. Lets hope that the decision makers are on their toes during the coming months.

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