Oil prices jumped on Friday following improved US jobs data and talks of stimulus measures by the euro zone to support growth. Supply disruptions in the North Sea and the Middle East also aided prices although Sudanese crude exports could resume soon as Sudan and South Sudan reached a deal on oil transit fees.
Brent crude fell 47 cents to $108.47 a barrel early on Monday after jumping nearly 3% on Friday. US crude edged down 23 cents to $91.17 after surging close to 5% in the previous session.
“Prices did rise quite a lot so it’s probably profit-taking going on,” said Michael Creed, an economist at the National Australia Bank.
US employers hired the most workers in five months in July, but an increase in the jobless rate to 8.3% kept prospects of further monetary stimulus from the Federal Reserve on the table.
Expectations for more stimulus measures from the euro zone to support the debt-laden region and the latest pledge by China, the world’s top energy consumer, to step up monetary policy fine-tuning were also helping to keep a floor under oil prices.
“There is a greater degree of optimism in commodities surrounding the euro zone than two-three weeks ago,” Creed said.
“We are still awaiting details regarding what Draghi meant by he’ll do anything to maintain the euro.”
Data due from China this week are likely to show the world’s second-largest economy is, at best, stabilising rather than recovering briskly.
On the supply side, a fall in North Sea output due to maintenance and lower exports from Iran on tight Western sanctions have shored up oil prices.
But Sudanese oil exports may resume soon as Sudan reached a deal with South Sudan on oil transit fees, a first step towards ending a dispute which had brought the hostile neighbours close to war.
Sudan, however, also said it wanted a border security agreement before oil flows resumed.
Disputes between the countries have reduced Sudanese crude exports by about 350,000 barrels per day from early this year.
Investors are also watching the approach of Tropical Storm Ernesto which kept on a westerly course in the Caribbean Sea on Sunday and was expected to strengthen slowly over the next 48 hours.
Forecasters expect Ernesto to move into the southern Gulf of Mexico by Thursday but it was too early to know whether it could disrupt oil and gas operations in the gulf.
“Brent is testing a longer term resistance at around the $109 a barrel,” ANZ analysts said in a note.