Oil falls on strong dollar, stalling rally as 2018 began
NEW YORK — Oil prices fell on Friday as the dollar surged following strong US jobs numbers, though compliance with output cuts by the Organization of the Petroleum Exporting Countries (OPEC) and rising global demand kept much of the early-year oil rally in place.
An increasingly correlated trade between oil, stocks, bonds and the dollar has amplified swings in the markets.
US West Texas Intermediate ( WTI) crude settled down 35 cents to $65.45 a barrel, after earlier losing more than 1%. Brent lost $ 1.07, or 1.5%, to $ 68.58 a barrel. The deep decline in Brent narrowed the gap between it and WTI to its narrowest since August; that wide gap has boosted US exports in recent months.
Oil fell as the dollar rose after US jobs growth surged in January and wages rose, recording their largest annual gain in more than eight-and-a-half years.
“The market this week has had a strong tie with the dollar. When the dollar basically bounced, we had to start selling,” said Gene McGillian, manager of market research at Tradition Energy in Stamford, Connecticut.
Futures positioning from the Commodity Futures Trading Commission showed speculators cut positions in crude oil futures, though they still have a long position of 531,235 contracts, as they have been buying heavily in recent weeks’ oil market rally.
Mr. McGillian said support from buyers will diminish if the coming weeks show additional increases in crude inventories after this week’s data showed the first build after 10 weeks of declines.
US crude stocks rose by 6.8 million barrels for the week ended Jan. 26. Output cuts from large producers, strong demand and declining imports have helped draw down US supply.
January OPEC production rose from an eight- month low, according to a Reuters survey. Russian data showed strong compliance with output cuts, even as production hit 10.95 million bpd.
The cuts have offset gains in US crude production. US output surpassed 10 million bpd in November for the first time since 1970, the Energy Information Administration said last week.
For the week to Feb. 2, Baker Hughes said drillers added six rigs to bring the total to 765, the second straight week of gains.