Oil Falls as U.S. Dollar Strengthens

02/02/18 11:41 AM EST
By Stephanie Yang 

Oil prices declined on Friday, reversing gains as a stronger U.S. dollar weighed.

Light, sweet crude for March delivery fell $1.11, or 1.7%, to $64.69 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, lost $1.45, or 2.1%, to $68.20 a barrel.

Prices reversed course Friday morning as the U.S. dollar rose on the back of a strong jobs report. According to government data, the U.S. economy added 200,000 jobs in January, beating economists' expectations. Meanwhile, the unemployment rate stayed at its lowest level in 17 years and wage growth accelerated.

Crude prices have again started to take cues from the U.S. currency in recent days, after months of being pulled between supply cuts by major global producers and increased shale activity. The WSJ Dollar Index, which gauges the dollar against a basked of other currencies, was recently up 0.9% at 83.68.

Commodities such as oil, which are priced in dollars, become more expensive to other currency holders when the U.S. unit strengthens.

"The dollar is the talk today," said Ric Navy, vice president for energy futures at RJ O'Brien & Associates LLC. "You've had more attachment to it recently."

On Thursday, crude prices traded near a three-year high, bolstered by optimism over a tightening global market. Ongoing efforts by the Organization of the Petroleum Exporting Countries to curb output and lift prices have helped draw down a world-wide oil glut.

However, the recent rally has also sparked some profit-taking by investors, Mr. Navy said.

"I think you're just hitting some walls," Mr. Navy said. "It's forcing a bit of an exodus."

Meanwhile, climbing U.S. production remains a concerning backdrop for some investors as shale drillers churn out more crude than ever before.

According to the U.S. Energy Information Administration, U.S. oil production exceeded 10 million barrels a day in November for the first time in nearly 50 years. On a weekly basis, domestic production rose to a fresh record last week of 9.9 million barrels a day, government data show.

"U.S. oil production is obviously a bearish factor," said Kyle Cooper, an analyst at Ion Energy Group. "That also might be catching up to the market a little bit."

Oil market observers are looking ahead to the release of weekly data Friday afternoon by Baker Hughes that will report on the number of active rigs drilling for oil in the U.S., a proxy for activity in the sector.

Gasoline futures declined 2.5% to $1.8482 a gallon and diesel futures fell 1.9% to $2.0509 a gallon.

Christopher Alessi contributed to this article.

Write to Stephanie Yang at stephanie.yang@wsj.com


(END) Dow Jones Newswires

February 02, 2018 11:41 ET (16:41 GMT)

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