Crude futures dropped for a second day in New York as the dollar strengthened after a monthly jobs report, reducing the investment appeal of commodities.
West Texas Intermediate declined 2.3 percent and Brent fell 1.2 percent. The dollar surged to an 11-year high against the euro after the Labor Department said American employers added more jobs than forecast in February, bolstering the case for the Federal Reserve to raise interest rates.
Crude has lost half of its value since June as U.S. producers pumped oil at the fastest pace in three decades. Saudi Arabia has raised its pricing to Asia, signaling demand is improving after the nation led an OPEC decision in November to maintain output and defend market share against shale producers. A volatility index fell to the lowest level since December.
“The dollar soared after the jobs report and it’s weighing on oil prices,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “An area around $50 seems to be a fair price based on current fundamentals.”
WTI for April delivery lost $1.15 to end at $49.61 a barrel on the New York Mercantile Exchange, down 0.3 percent this week. The volume of all futures traded was 9.7 percent above the 100- day average for the time of day.
Brent for April settlement dropped 75 cents to $59.73 a barrel on the London-based ICE Futures Europe exchange. Futures lost 4.6 percent this week. The European benchmark was at a premium of $10.12 to WTI, compared with $12.82 on Feb. 27.
Volatility Index
The CBOE Crude Oil Volatility Index, which measures price fluctuations using options of the U.S. Oil Fund, declined 3.7 percent to 47.09 on Thursday, the lowest level since December. It was 49.11 Friday.
U.S. employers added 295,000 jobs last month, figures from the Labor Department showed Friday. The median forecast in a Bloomberg survey of economists called for a 235,000 increase. The unemployment rate fell to 5.5 percent from 5.7 percent.
“When the jobs report came out, people thought that there was a better chance you would see a rate hike in the U.S.,” said Michael Hiley, head of over-the-counter energy trading at LPS Partners Inc. in New York.
U.S. crude production and stockpiles expanded again from 30-year highs in the U.S. last week, according to the Energy Information Administration.
Rig Count
Output climbed to 9.3 million barrels a day even as rigs were pulled off oil fields, EIA data show. The nation’s crude stockpiles rose by 10.3 million barrels to 444.4 million, according to the Energy Department’s statistical arm. That was the biggest increase by volume in almost 14 years to the highest level in weekly data gathered by the EIA since August 1982.
Baker Hughes Inc. released the latest count of operational oil rigs in the U.S. Drillers cut the number of rigs targeting oil by 64 to 922 this week, the lowest level since April 2011, the data show.
“The market is becoming a little bit desensitized to the rig count,” Hiley said.
Refiners reduced their operating rate to 86.6 percent last week, down from 87.4 percent, reducing demand for crude oil.
“We will have probably one more week of lower or unchanged refinery runs and then we will start to emerge from turnaround season,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC.
OPEC pumped 30.6 million barrels a day in February, an increase of 163,000 a day that was led by gains from Saudi Arabia, the world’s biggest crude exporter. It was the ninth straight month that the 12-member group has produced more than its collective target of 30 million barrels a day, the data show.
State-owned Saudi Arabian Oil Co. said this week it will sell cargoes of its Arab Light crude to Asian customers in April at 90 cents a barrel below the regional benchmark. That narrows the discount by $1.40 from March, the biggest price increase since January 2012, according to data compiled by Bloomberg.