<Oils prices bounce back, rising above $113 a barrel in volatile trading
Oil prices bounced back above $113 a barrel in volatile trading Friday after falling sharply from the early-week record near $120 a barrel.
Light, sweet crude for June delivery on the New York Mercantile Exchange rose 54 cents to $113.06 a barrel in electronic trading by midday in Europe, up from a low of $111.78 earlier in the session. The contract fell 94 cents to settle at $112.52 a barrel on Thursday.
A stronger U.S. dollar and short covering by professional traders who bought back contracts as prices recovered after betting earlier that prices would fall further were both seen affecting the market.
As the dollar has recovered this week against the euro and yen, the front-month crude futures contract on the New York Mercantile Exchange has dropped nearly $8 from its high to benchmark oil's lowest level since April 14.
On Friday, the dollar rose against the 15-nation euro which fell to $1.5458 by midday in Europe from $1.5461 late Thursday in New York.
The rise of the dollar has stripped away some of oil's appeal to investors who have been betting that the greenback would continue to falter. When the dollar gains ground, commodities such as oil lose their value as a hedge against inflation, prompting selling. Also, a stronger dollar makes oil more expensive to investors overseas.
The market also was awaiting U.S. unemployment figures later Thursday, a possible sign of lower economic activity and energy demand.
"The U.S. employment number will be the key directional input for the day," analyst Olivier Jakob of Petromatrix in Switzerland said in a research note.
Experts were predicting that U.S. employers cut jobs yet again in April, which would mark the fourth straight month of job losses. The unemployment rate, now at 5.1 percent, is expected to edge up a notch.
The end of a strike that had cut production at an Exxon Mobil Corp. facility in Nigeria, a major U.S. oil supplier, also gave market participants a reason to sell on Thursday. Oil prices jumped last week and early this week on word of the strike, as well as on a separate labor action in Scotland.
The Scotland action, which ended Tuesday, caused the shutdown of a 700,000-barrel-a-day pipeline system that carries about a third of the U.K.'s North Sea crude.
Analysts caution, though, that oil's swoon could be temporary. The dollar's protracted decline has been a major factor behind oil's rise from about $64 a barrel a year ago, and future dollar weakness could easily push crude futures above $120, they say.
The dollar's recent gains have come on a view that the U.S. Federal Reserve is done cutting interest rates; lower interest rates tend to weaken the dollar. The Fed cut its key rate a quarter percentage point on Wednesday, without giving a clear indication of its future plans. With the benchmark federal funds rate at 2 percent, however, investors sense that the Fed can't cut rates much further.
Brent crude futures gained 67 cents to $111.17 a barrel on the ICE Futures exchange in London.
In other Nymex trading, heating oil futures were up 3.23 cents to $3.1500 a gallon while gasoline prices rose 0.73 cent to $2.8855 a gallon. Natural gas futures rose 2.4 cents to $10.585 per 1,000 cubic feet.
Associated Press writer Gillian Wong in Singapore and Jeannine Aversa in Washington D.C. contributed to this report.>
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