Crude futures lost early gains Friday, turning lower as equities markets fell.
The decline reversed a price surge spurred by government data showing U.S. job growth accelerated in December. Light, sweet crude for February delivery recently traded 62 cents, or 0.6%, lower at $101.19 a barrel on the New York Mercantile Exchange after trading as high as $102.80 earlier in the session. Brent crude on the ICE Futures exchange traded 42 cents lower at $112.32 a barrel. Oil prices initially surged after the Labor Department reported nonfarm payrolls rose by 200,000 last month, with private companies adding 212,000 jobs. The unemployment rate also declined to 8.5% in December, the lowest level since February 2009. But a decline in U.S. stocks, which have guided oil prices in recent months, along with a stronger dollar, took the wind out of early optimism about the U.S. economy.
A rising dollar typically weighs on oil prices as it makes crude more expensive for buyers in other currencies.
A report signaling weak U.S. crude demand Thursday sent prices down, and the data, which showed an increase in oil and fuel stockpiles, is keeping many traders from betting on sharply higher prices. Crude prices have hung near $100 a barrel in recent weeks as traders weigh an improving economic picture in the U.S. against tepid fuel demand, Europe’s still-unresolved debt crisis and slowing growth in China.
Meanwhile, investors are keeping close watch on the Persian Gulf. Iran has ratcheted up tensions there by threatening to close the Strait of Hormuz, the world’s most important oil transit chokepoint with a third of waterborne oil trade passing through the two-mile-wide strait each day. The U.S. has made clear it does not plan to allow Iran to close the transit route. Traders say that a premium has already been built into current oil prices, though any escalation toward conflict in the strait would likely send prices higher, at least initially.
EasyForexNews Research Team