By Christian Berthelsen
Oil prices fell sharply Friday as the dollar climbed in reaction
to strong U.S. jobs data and a report on domestic drilling activity
disappointed the market.
Light, sweet crude traded on the New York Mercantile Exchange,
the U.S. benchmark, turned negative early in the session as the
dollar climbed, followed later by global Brent futures. The drop
accelerated after a weekly report on U.S. drilling activity was
released but regained some ground into the close.
Though the oil market has stabilized after a steep selloff
between June and January, analysts say fundamentals remain weak
with continued supply growth and slower-than-expected demand. The
international market has rebounded more strongly than the domestic
one as supply interruptions in Libya and Iraq have brought a
measure of balance back into the global market; still, both leading
contracts lost ground for the week, with the U.S. benchmark
declining for the third week in a row and Brent falling for two of
the last three.
On Friday, the Nymex crude contract for April fell $1.15, or
2.3%, to $49.61 a barrel. The Brent contract fell 75 cents, or
1.2%, to settle at $59.73 a barrel on the ICE Futures Europe
exchange.
The U.S. gained 295,000 jobs in February, more than the average
estimate of 240,000 by economists surveyed by The Wall Street
Journal. Though strong jobs gains would normally be a bullish
indicator for oil and gasoline demand --as more people go back to
work and use their cars to get there--it actually undercut the oil
market by driving the dollar higher. Oil and the U.S. currency
often move inversely, as a stronger dollar raises oil prices for
buyers using foreign currencies.
Losses in the market accelerated after oilfield-services company
Baker Hughes Inc. said in a weekly report that the count of rigs
drilling for oil in the U.S. fell by 64 this week to 922. Though
the decline extended the trend for the 13th week in a row, it was
smaller than last week's and appears to be slowing overall, while
data from the U.S. Energy Information Administration continues to
show rising production. U.S. output is running at more than 9.3
million barrels a day and increased another 40,000 barrels a day
last week despite the rig count decline, Citigroup said in a
note.
The rig count has become a top focus of the market in recent
weeks as investors seek an indication of whether the supply
imbalance is beginning to stabilize, but its importance may be
starting to fade as the disconnect between it and production
activity becomes more clear.
"For right now, the Baker Hughes number has no immediate impact
and there's proof of that in the production numbers," said Tariq
Zahir, managing member of Tyche Capital Advisors. "People were
playing it and not understanding it, but they're starting to
understand it more."
Nymex gasoline futures ended down 0.3% at $1.8819 a gallon.
Diesel futures fell 0.4% to $1.8690 a gallon.
Write to Christian Berthelsen at
christian.berthelsen@wsj.com
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