SINGAPORE – Brent crude fell toward $59 a barrel on Monday as a promising U.S. jobs report pushed the dollar up, offsetting geopolitical tensions and the threat of output cuts in Libya and Iraq.
The dollar hit a more than 11-year high against a basket of currencies after data showed the U.S. unemployment rate fell to the lowest since May 2008 in February, making commodities priced in the greenback costlier for holders of other currencies
Brent eased 43 cents to $59.30 by 0445 GMT, after dropping 75 cents in the previous session. It fell 4.6 percent last week in its biggest decline since the week ended Jan. 9.
U.S. crude was down 27 cents at $49.34. It closed down $1.15 on Friday to complete a third week of declines.
Goldman Sachs said in a note that oil prices would reverse recent gains on rising global inventories, with U.S. crude expected to drop to around $40 a barrel.
Oil prices rose by almost a third between January and February on the back of Middle East supply disruptions, strong winter demand and high refinery margins.
But the focus is now on the dollar, analysts said.
“The U.S. dollar is continuing to strengthen. In the short-term it’s more about the dollar than anything else,” said Ben LeBrun, market analyst at Sydney’s OptionsXpress.
U.S. economic data to be released on Tuesday could lead to a further strengthening of the U.S. dollar which would be negative for commodities including oil, said LeBrun.
He said geopolitical issues in North Africa and the Middle East “are all playing second fiddle to the U.S. dollar”.
Goldman said in its note that “absent further unexpected OPEC disruptions, we expect Brent oil prices and timespreads to reverse their recent strength”.
Members of the Organisation of the Petroleum Exporting Countries (OPEC) should not cut output to “subsidize” higher-cost shale, OPEC Secretary-General Abdullah al-Badri has said.
In Libya, up to 10 foreign workers are missing in the latest attack on the country’s oil fields by Islamist militants and there is a possibility they have been taken hostage, Czech and Libyan officials said on Saturday.
Brent should trade within a range of $55.36-$63.04 this week, said Singapore’s Phillip Futures in a note on Monday.
U.S. crude should trade between $48.45-$55.02 although prices could move sharply upwards if the U.S. refinery strikes end this week, Phillip Futures said.