Singapore: Oil was steady on Friday, having erased gains for the week, on speculation the US jobs market may have emerged from a soft patch, putting into question the urgency of further monetary stimulus.
US crude for November shed 3 cents to $81.64 at 12:16pm, rebounding from a drop of as much as 0.7% to $81.15 as the dollar erased gains. Oil fell 1.9% on Thursday, when it touched $84.43, the highest since May 4. The front-month contract is little changed from last week’s close.
ICE Brent for November added 8 cents to $83.51.
“The dollar is the key short-term factor and the reinstatement of the linkage with the dollar will stay for a while yet,” JP Morgan oil analysts led by Lawrence Eagles said, referring to the inverse relation between the U.S. currency and oil, which becomes dearer to most as the greenback strengthens.
New US claims for jobless benefits hit a near three-month low last week, a report showed on Thursday, suggesting some let up in labor market distress ahead of a monthly report due later on Friday that is expected to show non-farm payrolls were unchanged in September.
US non-farm payrolls data is due at 6:00pm on Friday.
There is a risk that employment declined after an independent report on Wednesday showed private employers unexpectedly cut jobs by 39,000 in September.
Investors have this week braced for the Federal Reserve to start pumping more money into the US economy next month to boost growth, after the Bank of Japan on Tuesday surprised markets with an interest rate cut.
“Spot oil prices are likely to continue to rise through the start of winter,” according to JP Morgan.
Expectations for an expansionary monetary policy have driven the euro up 6% since August and also pushed the greenback to a record low against the Swiss franc and a 15-year low against the yen. The dollar weakened 0.2% against a basket of currencies on Friday.
Japan indicated on Friday that it would continue to intervene in foreign exchange markets when deemed necessary, on the eve of a Group of Seven meeting where tensions over competitive currency devaluation will be at the top of the agenda.
The Organization of the Petroleum Countries (Opec) meets in Vienna next week for the first time in seven months, during which prices have mostly stayed within the $70-$80 range the group favours, despite persistent oversupply especially in top oil consumer the United States.
Robust prices might induce Opec to pump more, helping to calm a rising market and limit damage to a fragile economy, but it is unlikely to agree a formal change in output.
“An important question to be asked is whether inventories will tighten markedly as Opec adopts policies to reduce the stock overhang, or whether prices will move higher to choke off demand and create inventory in the process,” JP Morgan said.
Workers at a French refinery joined a strike at a key oil port for only for a few hours on Thursday and said they would resume protests next week as part of a nationwide day of wrath over pension reforms.
Investors took profits on Asian equities and gold while also buying back some US dollars on Friday, squaring up before the latest US employment report and potentially contentious international meetings about currencies.