Oil Closes the Week Lower

Brian L Milne
By  Brian L. Milne , DTN Refined Fuels Editor

CRANBURY, N.J. (DTN) -- West Texas Intermediate crude futures for December delivery on the New York Mercantile Exchange slid nearly $1 Friday and is down 4.9% from prior Friday as the U.S. dollar rallied to a six-month high after the Labor Department reported an unexpected surge in U.S. job growth in October, firming sentiment a hike in the federal funds rate would take place in December.

NYMEX December oil products futures edged higher after a mixed session, lent support from the jobs report suggesting an improving U.S. economy that is seen boosting fuel demand.

The U.S. Bureau of Labor Statistics Friday morning said 271,000 new jobs were added to the economy in October, well above market consensus for job growth of roughly 190,000. It was the strongest jobs report since December 2014, with BLS also reporting a tick down in the national jobless rate to 5.0%, which the Federal Reserve considers full employment.

The Labor Department report is now seen giving the all clear for a rate hike in December by the Federal Open Market Committee, with Chair Janet Yellen midweek in Congressional testimony saying a December rate hike is a “live possibility.”

The reaction to the jobs report was swift, with the dollar rallying in index trading and NYMEX WTI futures reversing overnight gains and staying down for the remainder of the session.

A stronger dollar weakens domestic crude prices since oil trades globally in dollar denominations. A hike in the federal funds rate would also increase borrowing costs, with a near zero interest rate for the past several years seen boosting equities and, before oversupply conditions in several raw materials from metals to oil, commodities.

At settlement, NYMEX WTI crude futures were down 91 cents at $44.29 barrel, and near a better than one-week low at $44.11, while erasing $2.30 or 4.9% of its value on the week. The contract traded in a $44.11 to $48.36 bbl range this week.

December Brent crude futures traded on the IntercontinentalExchange eased 56 cents to $47.42 bbl, edging off a $47.27 better than one-week low. The contract traded in a $47.27 to $50.91 bbl range this week, and is down $2.14 or 4.3% from prior Friday.

NYMEX December ULSD futures edged up 0.24 cents to settle at $1.4896 gallon although eased 0.98 cents on the week. ULSD futures traded at a $1.4812 one-week spot low today, down from Wednesday’s $1.5816 gallon three-week spot high.

NYMEX December RBOB futures, which had rallied to a two-month high on the spot continuation chart Tuesday at $1.4714 gallon, ended Friday’s session up 0.85 cents at a $1.3695 gallon settlement. The spot-month RBOB contract slid 3.55 cents or 2.5% from prior Friday.

The decline in NYMEX WTI futures came despite a lower count for rigs drilling for oil in the United States, which fell six this week to 572, and the lowest number of rigs seeking oil since early June 2010. The WTI contract initially pared losses in reaction to the Baker Hughes, Inc. report, but later extended its decline to the $44.11 better-than one-week low in market-on-close trade.

Brian Milne can be reached at brian.milne@dtn.com

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Brian Milne