Oil dives on soaring dollar after US jobs report

(AFP/Prakash Singh)

NEW YORK: A robust US jobs report on Friday (Mar 6) sent the dollar soaring, driving a sell-off in the oil market that left the US futures benchmark back below US$50 a barrel.

West Texas Intermediate for delivery in April slid US$1.15 to US$49.61 on the New York Mercantile Exchange, ending near its week-ago level. Brent North Sea crude for April, the international benchmark, dropped 75 cents to US$59.73 a barrel in London.

The February jobs report came in much stronger than expected. The world's largest economy added 295,00 jobs, and the unemployment rate fell two-tenths to 5.5 per cent, the lowest level since May 2008.

"The strong job report was a negative for oil, and the reason for that is the dollar index has been on fire ever since this number came up this morning," said Phil Flynn, at Price Futures Group. "The dollar rallied on the expectation the Fed would drop its 'patient' term when it comes to raise its interest rates, and that dollar rally really caused the oil to sell off today," he said.

The greenback hit the highest levels against the euro in 11 and a half years. The stronger dollar makes dollar-priced crude oil more expensive for buyers using weaker foreign currencies.

The latest North American oil rig count from Baker Hughes fell for the 13th week in a row, by 64 units, or 6.5 per cent, to 922 this week.

Some market watchers expect the downward trend will eventually lead to a drop in US crude production.

"The US rig count was supportive to the market... but it's a little hard to overcome the strong dollar," Flynn said.

Brent earlier had found support from further unrest in Libya affecting oil operations.

Islamic State (IS) group extremists killed eight guards on Friday in an attack on the southern Libyan oilfield of Al-Ghani, said Libya's National Oil Company (NOC). Violence and a slowdown at export terminals had already forced most oilfields to shut down for the past several weeks.