Oil price rally fades

6th May 2016, Comments 0 comments

World oil prices slumped this week, retreating from 2016 highs, as the dollar rebounded and supply glut concerns returned to the fore despite disruptions to global production.

Even though the dollar fell back once more on Friday in the wake of poorly-received US jobs data, oil prices remained subdued.

A weaker US currency tends to make dollar-denominated crude cheaper for buyers holding rival currencies, spurring demand.

Benchmark contracts Brent North Sea crude and West Texas Intermediate had last week struck the highest points since early November, with Brent reaching close to $49 a barrel.

By Friday however, Brent was trading at $44.43 a barrel and WTI had slid to $43.74, a drop of around $3.0 week-on-week for the US benchmark.

"The oil price rally is faltering," said Commerzbank analyst Carsten Fritsch, adding that a series of events, such as lower production in the United States and disruptions to supplies in Canada and Libya, had failed to provide the expected support.

Fritsch said in a client note that this marked "a shift in sentiment on the oil market which could also weigh further on prices in the near future".

Traders on Friday focused on the US jobs report, which showed that an economic slowdown in the world's biggest economy and oil-consuming nation hit hiring by companies and government authorities last month.

A total of just 160,000 net new jobs were created in April, the lowest level this year, the Labor Department reported.

The jobs growth figure was well below expectations and pointed to the impact of the sharp slowdown of the US economy to a 0.5 percent growth rate in the first quarter of the year. Analysts had expected a modest slowdown from March to about 207,000 jobs.

Oil prices did manage a brief rally Thursday as raging forest fires in Canada struck Alberta's oil sands region. Authorities have since ordered the evacuation of its 100,000 people after firefighters, backed by air tankers and helicopters, failed to prevent the monster blaze from engulfing entire neighbourhoods.

Prices have meanwhile failed to win support from news of an attack on an offshore oil facility in Nigeria, operated by US oil group Chevron.

There was no immediate indication of the volume of crude affected but a Chevron official, who asked not to be identified, said the attack would hit gas supply to power plants already affected by almost daily outages.

The oil market is attempting to recover after nosediving to 13-year lows of around $27 in February, in the wake of a sustained drop from above around $100 seen two years ago.

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© 2016 AFP

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