Crude Oil Ends Below $90 As Dollar Strengthens On Solid U.S. Jobs Data

(RTTNews) - U.S. crude oil plunged to end below the $90-dollar mark on Friday, after the dollar trended sharply higher after some upbeat jobs data from the U.S., with unemployment rate at its lowest level in over six years even as employment rose more than expected in September.

The dollar strengthened over 1.2 percent against a basket of some select currencies on that sentiment. A strong dollar makes the dollar-denominated commodities such as oil more expensive and unattractive for holders of other currencies.

The sell-off was further accentuated by concerns of a supply glut, with supply far exceeding demand. Speculation that Saudi Arabia will keep markets well-supplied has contributed to the fall in oil prices, as has the sudden surge to multi-year highs for the U.S. dollar.

Gasoline has also fallen sharply of late, with U.S. gas futures hitting 4-year lows amid demand concerns. Analysts see abundant supplies of major energy products due to a downturn in the pace of the global economic recovery.

With the solid employment data, analysts believe the Federal Reserve will almost certainly hike rates mid next year. Indications are the Fed is all set to hike interest rates a little ahead of schedule, perhaps by Spring next year.

Reflecting in part the stronger than expected job growth, unemployment rate in the U.S. dropped to 5.9 percent in September from 6.1 percent in August, as employment in September rose more than expected. Economists expected the rate to hold at 6.1 percent. The decline has taken the unemployment rate to its lowest level since the 5.8 percent recorded in July 2008.

Light Sweet Crude Oil futures for November delivery, the most actively traded contract, dropped $1.27 or 1.4 percent to close at $89.74 a barrel on the New York Mercantile Exchange Friday.

Crude prices for November delivery scaled a high of $91.79 a barrel intraday and a low of $89.36.

On Wednesday, crude oil futures rallied to end higher Thursday, after some upbeat economic news from the U.S. showed initial claims for unemployment benefits to have dropped more than expected last week.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 86.66 on Friday, up from its previous close of 85.61 late Thursday in North American trade. The dollar scaled a high of 86.75 intraday and a low of 85.63.

The euro trended lower against the dollar at $1.2513 on Friday, as compared to its previous close of $1.2669 late Thursday in North American trade. The euro scaled a high of $1.2675 intraday and a low of $1.2500.

In economic news from the U.S., a Labor Department report showed Friday the unemployment rate in the country unexpectedly fell to its lowest level in over six years, with employment increasing much more than anticipated in September.

The report said non-farm payroll employment jumped by 248,000 jobs in September following an upwardly revised increase of 180,000 jobs in August. Economists expected employment to increase by about 215,000 jobs compared to the addition of 142,000 jobs originally reported for the previous month.

Along with the upward revision to the August job growth, the report said employment in July climbed by 243,000 jobs versus the previously reported increase of 212,000 jobs.

Meanwhile, an Institute for Supply Management report on Friday showed the pace of growth in the U.S. service sector slowed down in September, after reporting an unexpected acceleration in the pace of growth in the previous month.

The ISM said its non-manufacturing index dipped to 58.6 in September from 59.6 in August, although a reading above 50 indicates continued growth in the service sector. Economists expected the index to drop to 58.5.

Also on a positive note, U.S. trade deficit unexpectedly narrowed in August, with the value of exports increasing slightly more than the value of imports, a Commerce Department report revealed Friday. U.S. trade deficit narrowed to $40.1 billion in August from a revised $40.3 billion in July. Economists expected the deficit to widen to $40.8 billion from the $40.5 billion originally reported for the previous month.

In Europe, the Markit/CIPS UK Services Purchasing Managers' Index dropped to 58.7 from 60.5 in August, results of a survey showed Friday. Economists had forecast a smaller decline in the index to 59.