After its best January since 2006, the oil market wrapped up the week on a slump as a stronger US dollar and weaker stocks added to concerns over booming shale production.
Futures on Friday slipped 0.5 percent in New York, with oil inversely tracking the dollar and US equities headed for the worst week in two years.
A stronger greenback reduces the appeal of raw materials as an investment. At the same time, worries over higher shale production added to the downward price momentum.
“The strong jobs report is certainly upping expectations for [US Federal Reserve] rate hikes, and that’s causing a little strength in the dollar, but is certainly causing some softness in the equity market,” said Rob Haworth, who helps oversee US$150 billion in assets at US Bank Wealth Management in Seattle. “You are seeing a bit of a risk-off day that’s actually bleeding into the oil market.”
Crude in New York lingered near US$65 per barrel, threatening to bring a flood of US shale to the market.
A bigger production surge is likelier than most expect, Citigroup Inc global head of commodities research Ed Morse said in a Bloomberg Television interview.
Drilling in the US intensified for a second week, with six oil rigs added, Baker Hughes data released on Friday showed.
West Texas Intermediate for delivery next month dropped US$0.35 to settle at US$65.45 per barrel on the New York Mercantile Exchange. Prices posted a 1 percent decline this week.
Brent for April settlement fell US$1.07 to end the session at US$68.58 per barrel. The global benchmark crude closed at a premium of US$3.51 to April West Texas Intermediate, the smallest since August last year.
The S&P 500 Energy Index tumbled almost 4.7 percent, with Exxon Mobil Corp, Chevron Corp and Hess Corp all dropping more than 5 percent.
US output surged to more than 10 million barrels per day for the first time in more than four decades in November last year, the US Energy Information Administration reported earlier this week. Weekly production is also at a record-high level.
Oil has been tracking the dollar all week, “and all of a sudden, oil prices are under pressure,” Stamford, Connecticut-based Tradition Energy market research manager Gene McGillian said in a telephone interview.
Meanwhile, “in the back of traders’ minds is the data that came out that showed US crude production jumped above 10 million barrels a day back in November,” he added.
Gasoline futures dropped 1.3 percent to settle at US$1.8720 per gallon, the lowest level in two weeks.
Hedge funds cut their bullish ICE Brent crude oil bets by the most since November, weekly ICE Futures Europe data on futures and options showed.
Exxon and Chevron, the two biggest US oil explorers, each missed Wall Street’s profit and production estimates, spurring a stock sell-off for both as wary investors hit the lifeboats.
Weatherford International PLC dropped more than 16 percent after reporting worse-than-expected results for the fourth quarter of last year and a lower forecast for the first three months of this year.
Wholesale gasoline fell US$0.02 to US$1.87 per gallon and heating oil fell US$0.04 to US$2.05 per gallon, while natural gas slipped US$0.01 to US$2.85 per 1,000 cubic feet.
Gold dropped US$10.60 to US$1,337.30 per ounce, while silver slid US$0.45 to US$16.71 per ounce and copper lost US$0.02 to US$3.19 per pound.
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