Crude Oil Extends Surge Amid Ongoing Supply Concerns

Extending the rally seen over the past several sessions, the price of crude oil showed another significant move to the upside during trading on Friday.

Crude for October delivery surged $1.92 or 2.3 percent to $85.55 a barrel, closing higher for the seventh straight session. The price of crude oil soared 7.2 percent for the week.

The extended spike in oil prices came amid ongoing concerns about tight supplies, with OPEC+ expected to extend their output cuts.

Russia indicated it may continue its voluntary cut on crude exports until next month, while traders expect a similar announcement from Saudi Arabia.

A report released earlier this week showing a continued slump in U.S. crude oil inventories also continued to support oil prices.

Oil may also have benefitted from a Labor Department report showing stronger than expected job growth in August but an unexpected increase in the unemployment rate.

While the job growth points to continued strength in the economy, the increase in the unemployment rate has added to optimism the Federal Reserve will leave interest rates unchanged later this month.

U.S. Construction Spending Climbs More Than Expected In July

Construction spending in the U.S. increased more than expected in the month of July, according to a report released by the Commerce Department on Friday.

The report said construction spending climbed 0.7 percent to an annual rate of $1.973 trillion in July after rising by 0.6 percent to a revised rate of $1.959 trillion in June.

Economists had expected construction spending growth to match the 0.5 percent increase originally reported for the previous month.

The bigger than expected increase came as spending on private construction jumped by 1.0 percent to an annual rate of $1.549 trillion.

Spending on residential construction surged by 1.4 percent to a rate of $879.0 billion, while spending on non-residential construction rose by 0.5 percent to a rate of $670.0 billion.

Meanwhile, the Commerce Department said spending on public construction fell by 0.4 percent to an annual rate of $423.7 billion.

Spending on highway construction slid by 0.6 percent to a rate of $128.1 billion, while spending on educational construction inched up by 0.1 percent to a rate of $89.8 billion.

European Economic News Preview: Eurozone Money Supply Data Due

The monetary aggregates from the euro area is the only major economic report due on Monday.

At 2.00 am ET, Statistics Norway publishes household consumption and retail sales figures for July.

In the meantime, retail sales figures are due from Denmark.

At 4.00 am ET, the European Central Bank is slated to publish monetary aggregates for July. Eurozone M3 money supply is forecast to remain flat on year after a 0.6 percent rise in June. Loans to companies and households are expected to climb 2.5 percent and 1.4 percent, respectively.

At 6.00 am ET, retail sales data is due from Ireland.

U.S. Manufacturing Index Indicates Modestly Slower Contraction In August

Indicating a slower pace of contraction, the Institute for Supply Management released a report on Friday showing an uptick by its reading on U.S. manufacturing activity in the month of August.

The ISM said its manufacturing PMI rose to 47.6 in August from 46.4 in July, although a reading below 50 still indicates a contraction. Economists had expected the index to inch up to 47.0.

The modest increase by the headline index came as the production index climbed to 50.0 in August from 48.3 in July, indicating production was unchanged following two months of contraction.

The employment index also jumped to 48.5 in August from 44.4 in July, suggesting employment in the manufacturing sector shrank at a notably slower rate.

Meanwhile, the report said new orders index edged down to 46.8 in August from 47.3 in July, as demand remained soft.

“The August composite index reading reflects companies managing outputs appropriately as order softness continues, but the month-over-month increase is a sign of improvement,” said Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee.

On the inflation front, the prices index shot up to 48.4 in August from 42.6 in July, although the reading below 50 indicates raw materials prices decreased for the fourth straight month.

The ISM is scheduled to release a separate report next Wednesday on service sector activity in the month of August. The services PMI is currently expected to edge down to 52.6 in August from 52.7 in July.

Oil Prices Gain On Signs Of Tight Supply

Oil prices rose on Friday and were set for a weekly gain after Russia signaled that it would extend export curbs.

A weaker dollar, improved manufacturing data from China and Europe along with signs of more stimulus from Beijing also supported prices, heading into the weekend.

Benchmark Brent crude futures rose half a percent to $87.31 a barrel, while WTI crude futures were up 0.6 percent at $84.11.

There are expectations of further supply cuts by OPEC+ members after Russia indicated that it may continue its voluntary cut on crude exports until next month.

Details are expected to be released next week, according to Deputy Prime Minister Alexander Novak. Traders expect a similar announcement from Saudi Arabia.

The dollar index traded weak on expectations that the Federal Reserve is done with raising rates.

In news out of China, the People’s Bank of China said it would cut foreign exchange reserve requirement ratio for financial institutions in a bid to boost liquidity and shore up the yuan.

A private survey showed Chinese factory activity unexpectedly expanded in August, raising optimism that the worst of factory slump in Asia’s largest economy may be over.

In Europe, a survey showed the downturn in euro zone manufacturing sector eased last month, with the corresponding PMI reaching a three-month high.