Oil falls ahead of US jobs data, caution on interest rates

Investors continue to look to macroeconomic data and monetary policy for potential clues on the outlook for oil demand.

U.S. unemployment claims increased by more than expected in the last week, according to Labor Department statistics, as labor market conditions gradually ease.

That came after Chair Jerome Powell expressed caution on Wednesday about the timing of future interest rate cuts, after recent data has showed higher-than-expected job growth and inflation.

March's employment report on Friday is likely to show nonfarm payrolls increased by 200,000 jobs in March after rising by 275,000 in February, according to a Reuters survey.

"One thing that could thwart an oil rally is if the Federal Reserve takes rate cuts off the table," said Phil Flynn, analyst at Price Futures Group.

The threat of sanctions has also capped some gains.

The United States on Thursday imposed new Iran-related counter-terrorism sanctions against Oceanlink Maritime DMCC and its vessels, citing its role in shipping commodities on behalf of the Iranian military.

The United States is using financial sanctions to isolate Iran to disrupt its ability to fund its proxy groups and hamper the country's support for Russia's war in Ukraine, the Treasury Department said.

Washington has also signalled it could reimpose oil sanctions ahead of Venezuelan presidential elections later this year that many countries have said might not feature competitive voting.

Oil's recent gains have also followed Ukrainian attacks on Russian refineries that cut fuel supply, and concerns the Israel-Hamas war in Gaza may spread to include Iran and possibly disrupt supplies in the Middle East region.

It also traded higher as Mexico's state energy company Pemex requested its trading unit to cancel up to 436,000 barrels per day of crude exports this month as it gets ready to process domestic oil at the new Dos Bocas refinery.

"All of these geopolitical factors happened at once, driving bullish sentiment and ultimately some profit taking," said Frank Monkham, senior portfolio manager at Altimo LLC.

A meeting of top ministers from the Organization of the Petroleum Exporting Countries and its allies (OPEC+) including Russia, kept oil supply policy unchanged on Wednesday and pressed some countries to boost compliance with output cuts.

The group said some members would compensate for oversupply in the first quarter. It also said Russia would switch to output rather than export curbs.

Both the June Brent contract and the May WTI contract closed on Wednesday at their highest levels since October, having received support in recent days from the heightened geopolitical tensions and potential supply risks.

"While this (OPEC+ decision) was widely expected, it provides some assurance that the recent rise in tension in the Middle East has not altered the group's view on the market," ANZ analysts said in a note on Thursday.

Iran has vowed revenge against Israel for an attack on Monday that killed high-ranking Iranian military personnel. Iran is the third-largest producer in .