Oil Down as USD Rallies on Bullish Jobs

NEW YORK (DTN) -- New York Mercantile Exchange September oil futures turned lower Friday morning, falling alongside equities on Wall Street as the dollar rallied after the Bureau of Labor Statistics released a slightly bullish payroll report.

BLS said this morning that 215,000 nonfarm jobs were created in July, falling short of a consensus estimate for a 225,000 expansion, while the nationwide unemployment rate remained steady at 5.3%, the lowest in seven years.

Although slightly below expectations, the report also made revisions to new job totals for May and June, increasing the total of new jobs for those two months by 14,000. Job gains have averaged 235,000 per month over the past three months and 211,000 per month for the year through the end of July, with the latest report also showing job growth in the manufacturing sector.

The report suggests the labor market continues to improve, setting the stage for the Federal Reserve to raise interest rates later this year for the first time in nine years.

At 8 a.m. CDT, NYMEX September crude futures moved 31 cents lower at $44.35 bbl and near a fresh better-than 4-1/2 month spot low of $44.07. ICE September Brent futures moved down 55 cents to $48.97 bbl, edging off a fresh six-month spot low of $48.76.

In products trade, the NYMEX September ULSD futures contract eased 0.67 cents to $1.5432 gallon, near a six-year spot low of $1.5212. The NYMEX September RBOB futures contract fell 3.26 cents to $1.6152 gallon, trading near a fresh better-than five-month spot low of $1.6124.

On Wall Street, stock indices were lower this morning ahead of their open while the dollar reversed higher, rallying to a 3-1/2 month high versus six major foreign currencies after the pivotal July jobs report was issued.

The oil futures complex also came under pressure from lingering concerns over excess supply, but the downside was limited by technical support, analysts said.

“Oil is trading on very important historical support as the market tries to find support at $44 a barrel,” said analyst Phil Flynn at Price Futures Group. “For oil to go much below these price levels and stay there we would have be in a new paradigm because it is a level that oil has been in only 3% of the time in the last 10 years.”

Total commercial crude stocks in the United States are 24.5% higher than a year ago despite a 4.4 million bbl stock draw last week, with production up 52,000 bpd to 9.465 million bpd, Energy Information Administration showed on Wednesday.

George Orwel can be reached at george.orwel@dtn.com