Crude oil futures settled modestly higher Thursday, inching to a one-month high, but failed to break above $90 a barrel as a rally in equities prices fizzled.
Traders said a growing storm in the U.S. Gulf of Mexico that shut in a precautionary 80,000 barrels a day of oil output likely kept prices from declining on the day.
Market interest now will be focused on the August non-farm payrolls report due out at 8:30 a.m. EDT Friday, the latest updates from the National Hurricane Center, and short-covering ahead of the Labor Day holiday which will close markets on Monday.
"Nobody wants to go home short this weekend" with the "wildcard" of potential hurricane activity in the key oil-producing region, said Rich Ilczyszyn, market strategist at MF Global.
Seven companies have evacuated nine platforms in the Gulf of Mexico and shut in nearly 80,000 barrels a day of oil production, which is 5.7% of the flow from the region, the Bureau of Ocean Energy Management, Regulation and Enforcement said. Some 2.4% of the Gulf's natural gas output, or 127 million cubic feet, was also shut in by mid-afternoon on Thursday as a precaution ahead of the storm.
The National Hurricane Center said there is a 80% chance that the storm could develop into a hurricane within 48 hours as it moves slowly northward and advised residents of the northern Gulf of Mexico region to closely monitor it. Meanwhile, Hurricane Katia, now a category one storm, was expected to strengthen and could become a major hurricane, as it moves east of Puerto Rico early Sunday.
Light, sweet crude oil for October delivery settled 12 cents higher, at $88.93 a barrel, the highest level since Aug. 3. The contract hit a high of $89.90 a barrel, which many trader said placed on a path to challenge the $90.50 level. But the rally lost steam when equities turned lower.
The Labor Day report is expected to show non-farm payrolls in August rose by 80,000. Economic indicators provided a mixed picture Thursday,
New claims for jobless benefits fell by 12,000 to 409,000 in the week ended Aug. 27, the Labor Department said. That was below a consensus forecast for 410,000 claims. At the same time, the department reported worker productivity in the second quarter was revised to show a decline of 0.7%. That compared with a preliminary reading of a 0.3% decline and economists' consensus of a 0.6% decline. Labor costs were also revised upward, throwing up a potential barrier to corporate profit and job growth potential as the economy struggles to recover.
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