Oil Mixed After Strong US Jobs Data

NEW YORK (DTN) -- New York Mercantile Exchange oil futures moved mixed with the West Texas Intermediate contract reversing lower on the back of a strong U.S. payroll report Friday morning, triggering a rally in the U.S. dollar while equities and commodities eased on expectation the Federal Reserve now has a reason to raise interest rates for the first time in nearly a decade.

At 8 a.m. CT, NYMEX December WTI futures fell 53 cents to $44.67 barrel, near one-week low of $44.65, while ICE December Brent futures declined 24 cents to $47.74 bbl, a one-week low.

Products were holding on to gains, with the NYMEX December ULSD futures contract edging up 0.41 cents to $1.4913 gallon while the December RBOB futures contract gained 0.42 cents to $1.3652 gallon.

The Bureau of Labor Statistics reported 271,000 jobs were created in October, the biggest monthly increase since December 2014, and surpassing expectations for job growth of 190,000. The unemployment rate fell to 5.0%, the lowest it has been since April 2009, from 5.1% a month prior. The Fed considers 5.0% full employment.

August jobs data was revised up 17,000 while September job gains were revised down 5,000. Hourly wage gains doubled to 0.4% month-over-month while year-over-year earnings surged 2.5%, the biggest gain since July 2009. The 2.5% annualized jobs gain is higher than 2.2% for September and a projected 2.3% increase.

The reaction on Wall Street was quick, with the oil and stock markets mostly falling on growing risk of a rate hike, which is expected to reduce liquidity investors have come to rely on in recent years.

A tighter monetary policy is often bullish for the dollar but bearish for oil prices. A stronger greenback also makes oil, which trades internationally in dollars, more expensive for holders of other currencies.

Fed Chair Janet Yellen opened the door for a rate hike, telling Congress on Wednesday there's a possibility rates will increase in December if the labor market continues to improve. With this report, analysts said a December rate hike is a near certainty now, adding the pace of increases would be gradual.

The market now awaits weekly rig data from Baker Hughes, Inc. set for release early Friday afternoon.

On Wednesday, the Energy Information Administration's weekly oil data showed refiner inputs increased 21,000 barrels per day during the week ended Oct. 30, but domestic crude production ramped up 48,000 bpd last week after climbing 20,000 bpd during the week ended Oct. 23.

The market remains wary about oversupply, with growing speculation the Organization of the Petroleum Exporting Countries will not reduce cartel output quotas at their regular meeting on Dec. 4.

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