Brent posts weekly gain, US crude falls on inventories data

Oil prices were headed in different directions this week. While US crude futures were in decline, Brent prices rose in London amid signs of further progress in Europe’s efforts to resolve its debt problems.

This week, the EU managed to agree on a deal to tighten fiscal discipline within the euro zone by introducing automatic penalties for countries that breach their budget deficit targets. All EU members except for Britain and the Czech Republic signed the agreement.

In the meantime, Greek Prime Minister Lucas Papademos said the debt-ridden country has made “significant progress” it its negotiations with private bondholders to hammer out a deal that would reduce its debts and enable it to secure further financial aid from the EU and the IMF.

If Greece missed out on the next €130 billion bailout package, it will likely fail to pay €14.4 billion worth of bonds that are due on March 20 and go into a default.

Papademos suggested that a deal could be in place as soon as early next week.

Oil futures in London and New York received more support from Wednesday’s manufacturing data released by the Chinese government. The official PMI index for January came in at 50.5, an increase from 50.3 in the previous month.

Readings another 50 indicate an expansion, while anything below that level signals contractions.

HSBC’s gauge of manufacturing activity in China, which was released earlier in the week, stood at 48.8.

Likewise, this week’s US jobs data was positive. On Thursday, the Department of Labor reported a decline of 12,000 to 367,000 in the number of initial applications for unemployment benefits for the week to January 29.

A day later, the closely watched non-farm payrolls report revealed that the US economy created 243,000 jobs, while expectations were for an increase of up to 150,000.

In addition, the jobless rate surprisingly dropped from 8.5 percent to 8.3 percent, which was seen as another sign that the economic recovery in the world’s largest energy consumer is picking up speed.

While Brent crude added roughly US$3 during the week, US benchmark crude declined after the Department of Energy said US oil inventories added a massive 4.2 million barrels last week as demand for crude from refineries fell. 

US light, sweet crude for March delivery, currently the most actively traded contract on the New York Mercantile Exchange (NYMEX), ended the week at US$97.84/barrel.

March Brent crude closed at US$114.71/barrel on the ICE Exchange yesterday.

Oil and gas majors were headed in different directions this week.

BP (LON:BP.) advanced from 464.55 pence to 484.5 pence over the past five days of trading, while fellow supermajor Royal Dutch Shell (LON:RDSB) fell from 2,311 pence to 2,294 pence.

BG Group (LON:BG.) declined from 1,430 pence to 1,425 pence, while Cairn Energy (LON:CNE) rose from 282.2 pence to 288.8 pence and Tullow Oil (LON:TLW) rallied from 1,369 pence to 1,462 pence.