The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, shot up more than 1.25% to an intraday high of 99.47 on the back of a robust USA national employment report.
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The oil market rose on Friday but gains were limited by the global supply glut and after the US Federal Reserve hinted at a December interest rate hike.
But there are other near-term obstacles for price momentum, including the strong dollar and a persistent overhang of physical oil. Gasoline futures are still up 1.2% for the day at $1.3769 a gallon. This year, while oil demand in China has softened, their imports are well above a year ago.
Oil prices have been stuck in a tight range below $50 a barrel in recent weeks as the global oversupply of crude, which has battered prices since past year, shows few signs of abating. According to Scotland-based energy consultancy Wood Mackenzie, oil companies have put over $200 billion spending on hold as crude oil prices hover around $50 a barrel, down from $114 a barrel in mid-2014, The Wall Street Journal reported.
Comments this week by Fed chair Janet Yellen and New York Fed president Bill Dudley considered as “hawkish” by the market have firmed up expectations for the December FOMC meeting “as a live possibility for the first Fed rate hike in almost a decade”, Singapore´s United Overseas Bank said.
Market sentiment went deeper into bearish mode overnight in the US on oversupply concerns after reports that the Organization of the Petroleum Exporting Countries doesn’t plan on trimming output to salvage prices. In the past, OPEC often orchestrated production cuts that made oil scarcer and drove prices up. With the mild losses, oil rigs nationwide dropped to their lowest level since June, 2010.
In 1999 oil prices had just come off a year (1998) where oil prices had dipped as low as $10.35 per barrel and there was doom and gloom across the energy space.
Nymex reformulated gasoline blendstock-the benchmark gasoline contract-rose 1.6% to $1.38 a gallon.
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Brent crude futures LCOc1 had risen 40 cents to $48.38 a barrel by 0510 ET, still on track to fall more than 2 percent from the previous week. Contributing to the growth was a near doubling of production from the former Soviet Union by 2020 (primarily in the Caspian Sea oil fields), new fields in the North Sea, and increases in the offshore regions of West Africa.
