Crude Oil Lifted by Sanctions Against Iran

Crude oil futures are trading higher on Friday after the U.S. Treasury imposed sanctions on some Iranian individuals and entities in reaction to a ballistic missile test that violated the terms of a nuclear treaty. Earlier in the week, the White House had put Iran “on notice” after the incident.

Under the terms of the sanctions, 13 individuals and 12 entities cannot access the U.S. financial system or deal with U.S. companies.

In other oil related news, oilfield services firm Baker Hughes reported U.S. drillers added 17 oil rigs in the last week. The count has been trending higher since bottoming last June and now stands at 583 rigs, compared with 467 rigs at this time a year ago.

Despite the news regarding the sanctions, today’s rally couldn’t gain traction and was capped by the bearish impact of rising U.S. crude production.

Gold

April Comex Gold was mostly steady throughout mid-morning as it recovered from earlier session lows. The catalyst behind the turnaround was a weaker U.S. Dollar. If gold holds onto its gains into the close then is should close over two-percent higher. This would mark the biggest weekly increase since early November.

Speculative buyers continued to support gold prices this week with holdings of the world’s largest gold-back exchange-traded fund, SPDR Gold Shares, rising on Thursday by 1.5 tonnes to 811.22 tonnes.

The World Gold Council also said that investment in gold rose to a four-year high last year, however, demand for gold used in jewelry fell to its lowest since 2009. Gold coin and gold bar demand also weakened.

U.S. Dollar

The U.S. Dollar was under pressure on Friday as investors reacted negatively to the U.S. Non-Farm Payrolls report. The headline number came in well above expectations but weak wage growth in January weakened the case for near-term interest rate hikes.

According to the U.S. Labor Department, non-farm payrolls increased by 227,000 last month. It was the largest increase in four months, beating the consensus estimate of 170,000. Average Hourly Earnings increased only three cents or 0.1 percent. Investors were pricing in an increase of 0.3 percent.

A strong jobs report would’ve strengthened the case for a rate hike in March. The weak jobs report likely reduces the odds for three rate hikes in 2017 as forecast by the Fed in December. Traders are now saying the Fed may raise rates in June and December.