Oil Shaves $1, Retreats to Bear territory on U.S. Dollar Spike

 

Global crude oil prices extended a months-long rout into bear market territory on Friday, with Brent notching a new 27-month low as the dollar spiked following upbeat U.S. employment data and further signs of undiminished crude supply.

The rallying U.S. dollar has re-emerged as a key driver for commodity prices in recent months, making raw materials more costly for most importers and reviving a once-popular spread trade. It reached a more than four-year peak on Friday after a report showing the U.S. economy created more jobs than expected last month, putting unemployment at a six-year low.

Brent for November delivery fell by $1.11 to settle at $92.31, after earlier touching $91.48 a barrel, its lowest since June 2012. It lost 5.1 percent on the week, its steepest weekly loss since April 2013. It was the fourth week in five that the international benchmark has settled lower.

Brent has fallen by more than 20 percent since June, when it climbed near $116 following the incursion of Islamist militants into Iraq.

U.S. November crude fell by $1.27 to settle at $89.74 a barrel. It has lost around $2 this week, its steepest weekly fall in a month.

"The surging dollar is the primary driver pressing us back down again," said John Kilduff, a partner at Again Capital LLC in New York. He also cited rising production from Russian oil fields emerging from maintenance, and a report from this week showing OPEC production hitting two-year highs of 31 million barrels per day (bpd)in September.

The spread between the front month Brent and U.S. crude futures contracts settled at $2.57, widening by more than $1 after reaching its narrowest since August 2013 at $1.42 a barrel earlier in the session.

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Conflict in the Middle East has not had a significant impact on supply. Islamic State activities in northern Iraq have had little impact on oil-producing southern provinces, while production in Libya has accelerated despite deep instability.

A cut in output by the Organization of the Petroleum Exporting Countries (OPEC) could support oil prices, but the group is not due to meet until Nov. 27 and there have been no signals that it will take action before then.

Although OPEC member Iran has called for supply cuts, other core members are betting that winter demand will revive the market.

Speculators boosted their bullish bets on U.S. crude oil just before a jarring price rout on the market this week, weekly trading data showed on Friday.

Money managers, including those at hedge funds, raised their net long holding in U.S. crude futures and options by 7,599 to 208,224 contracts for the week ended Sept. 30, according to the data from the U.S. Commodity Futures Trading Commission (CFTC). (Additional reporting by Claire Milhench and Sam Wilkin in London, Manolo Serapio in Singapore; Editing by Marguerita Choy and Chizu Nomiyama)