Crude climbs on US jobs report, China talks

By Erwin Seba

HOUSTON (Reuters) -Crude rose more than $1 a barrel on Friday morning and oil prices were on track for their first weekly gain in three weeks after a favorable U.S. jobs report and resumed trade talks between U.S. President Donald Trump and Chinese leader Xi Jinping, raising hopes for growth in the world's two largest economies.

Brent crude futures gained $1.28, or 1.96%, to $66.62 a barrel by 1649 GMT. U.S. West Texas Intermediate crude climbed $1.34, or 2.11%, to $64.71.

On a weekly basis, both benchmarks were on track to settle higher after declining for two straight weeks. Brent has advanced 2.75% this week, while WTI is trading 4.9% higher.

"I think the jobs report was Goldilocks," said Phil Flynn, senior analyst with the Price Futures Group. "It was not too hot, not too cold but just right to increase the chances for an interest rate cut by the Federal Reserve."

The U.S. Labor Department's monthly employment report showed the unemployment rate held steady at 4.2% last month. Employers added 139,000 jobs, which combined with downward revisions to prior months' estimates showed a cooling in labour demand but nothing abrupt; by comparison, job gains averaged 160,000 last year.

A rate cut by the U.S. central bank, much desired by the Trump administration, is seen as a way to increase spending, raising demand for petroleum.

Flynn also said the planned output hike announced by OPEC+ to begin in July would likely be absorbed by higher demand, keeping supply tightly balanced with demand.

China's official Xinhua news agency said trade talks between Xi and Trump took place at Washington's request on Thursday. Trump said the call had led to a "very positive conclusion", adding the U.S. was "in very good shape with China and the trade deal".

Canada also continued trade talks with the U.S., with Prime Minister Mark Carney in direct contact with Trump, according to Industry Minister Melanie Joly.

The oil market continued to swing with news on tariff negotiations and data showing how trade uncertainty and the impact of the U.S. levies are flowing through into the global economy.

"The potential for increased U.S. sanctions in Venezuela to limit crude exports and the potential for an Israeli strike on Iranian infrastructure add to upside risks for prices," analysts at BMI, a Fitch affiliate, said in a note on Friday.

Top exporter Saudi Arabia cut its July crude prices for Asia to near two-month lows. That was a smaller price reduction than expected after OPEC+ agreed to ramp up output by 411,000 barrels per day in July.

The kingdom had been pushing for a bigger output hike, part of a broader strategy to win back market share and discipline over-producers in OPEC+, which groups the Organization of the Petroleum Exporting Countries and allies including Russia.

"The market looks balanced in 2Q/3Q on our estimates as oil demand rises in summer and peaks in July-August, matching supply increases from OPEC+," HSBC said in a note.

"Thereafter, accelerated OPEC+ hikes should tip the market into a bigger 4Q25 surplus than previously forecasted," the bank added.

(Reporting by Erwin Seba in Houston and Ahmad Ghaddar, Enes Tunagur in London, Sudarshan Varadhan in Singapore; Editing by Toby Chopra, Susan Fenton and Louise Heavens)