Crude-oil futures finished sharply 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 the 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.
West Texas Intermediate crude for September delivery CLU21, -1.52% CL00, -1.52% lost 81 cents, or 1.2%, to end at $ 68.28 a barrel, after the U.S. benchmark grade climbed 1.4% on Thursday.
For the week, WTI finished off about 7.7%, representing U.S. oil’s sharpest weekly percentage 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 BRNV21, -0.35%, the global benchmark, fell 59 cents, or 0.8%, to settle at $ 70.70 a barrel on ICE Futures Europe, with an intraday high at $ 72.43 a barrel.
The contract climbed 1.3% in the previous session. Brent’s weekly decline, down nearly 6.3%, is the steepest since March 19 when it fell 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 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 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.
Meanwhile, Baker Hughes BKR, +1.80% on Friday reported that the number of active U.S. rigs drilling for oil rose by 2 to 387 this week. The total active U.S. rig count, which includes those drilling for natural gas, rose by three to stand at 491, according to Baker Hughes.
Elsewhere, the September natural-gas contract NGU21, -0.46% was nearly unchanged on the session, settling at $ 4.14 per million British thermal units, with a 5.8% weekly advance, boosted by hot weather and strong global demand.
Meanwhile, September gasoline RBU21, -1.91% lost 3.71 cents, or 1.6%, to settle at $ 2.2569 per gallon, with a weekly fall of 3.3%, representing the sharpest such fall since March 19; while September heating oil HOU21, -1.31% shed 2.15 cents, or 1%, to end at $ 2.0845 per gallon, with a 5.1% weekly drop, marking its sharpest such fall since mid March.