Crude-oil futures were headed lower Friday, with the commodity staging a turnaround from earlier gains after a better-than-expected report on U.S. employment helped to deliver a fillip to the U.S. dollar, weighing on assets priced in the currency.
The rise in the dollar and persistent hand-wringing around the spread of COVID-19’s delta variant and its potential impact on energy demand, has produced a nagging headwind for crude, oil analysts said.
“I think the main source of weakness is ithe ongoing concerns about COVID on demand and the rising dollar after the jobs report,” Phil Flynn, senior market analyst at The Price Futures Group, told MarketWatch.
For the week, WTI is off about 7.5%, while Brent is off nearly 6%, so far. A decline of that magnitude would represent U.S. oil’s sharpest weekly drop since the period ended Oct. 2, FactSet data show.
The slump in crude prices over the week has come as the delta variant has prompted renewed mobility restrictions. Both Japan and China have reinstated lockdown measures in some regions to limit the spread of the highly transmissible variant.
October Brent crude
the global benchmark, was 31 cents, or 0.5%, lower at $70.96 a barrel on ICE Futures Europe, with an intraday high at $72.43 a barrel.
The contract climbied 1.3% in the previous session. Brent’s weekly decline, down nearly 6%, would be its steepest since March 19 when it dropped 6.78%.
Friday’s monthly jobs report showed U.S. employers added 943,00 jobs, outstripping estimates for 845,000 and marking the fastest pace of job creation in nearly a year, while the unemployment rate fell to 5.4% from 5.9% in the previous month, lower than the 5.7% rate economists had forecast. The numbers alleviated some concerns about the impact the delta variant of the coronavirus was having on the economy, but saw the dollar rallied on the news as bond yields rose.
Earlier gains in crude had been supported by emerging conflict in the Middle East, which could ultimately impinge upon supplies if it worsens. Israel and Hezbollah, backed by Iran in Lebanon, have been exchanging rocket fire for three days. Friday’s exchanges came a day after Israel’s defense minister warned his country is prepared to strike Iran following a fatal drone strike on a oil tanker at sea that his country blamed on Tehran