Oil prices rebound on weak dollar

8th October 2010, Comments 0 comments

World oil prices rebounded on Friday, reversing earlier losses as investors took their cue from the weakening dollar after news of unexpected job losses last month in key energy consumer the United States.

Traders were meanwhile looking ahead to next week's output meeting of the OPEC oil cartel in Vienna.

Brent North Sea crude for delivery in November rallied 87 cents to 84.30 dollars a barrel in late afternoon deals.

New York's main contract, light sweet crude for November delivery jumped 1.16 dollars to 82.83 dollars.

The US economy unexpectedly shed 95,000 non-farm jobs in September and unemployment remained stuck at 9.6 percent, government data showed Friday, highlighting a sluggish economy recovery.

"The release of US payrolls data ... did nothing to quell the uncertainty in the markets, coming out much worse than expected (and) dropping by 95,000 against an expectation of no change," said CMC Markets analyst Michael Hewson.

The nonfarm payrolls reading also marked a sharp decline from a revised 57,000 job losses in August.

In reaction, the dollar wobbled, as analysts said the US Federal Reserve could step in with new stimulus measures to bolster the US economy, which is the world's biggest oil consumer.

"September's payroll report adds to the evidence that the (US) recovery is losing what little forward momentum it had -- and will harden the resolve of the more dovish Fed officials to press forward with another round of quantitative easing," said Capital Economics analyst Paul Ashworth.

A weaker dollar tends to boost demand for dollar-priced crude, which becomes cheaper for buyers using stronger currencies. In turn, that usually lifts oil demand and prices.

The oil market was also looking ahead to the meeting Thursday in Vienna of the Organization of Petroleum Exporting Countries, which pumps 40 percent of the world's crude oil.

Analysts expect no change in output as the cartel's 12 members appear satisfied with current prices.

"OPEC members will always have one eye on the rear view mirror," said Rebecca Seabury, an analyst at British energy consultancy Inenco.

"We saw oil prices down to mid-to low-30 dollars per barrel in the depths of the recession. Therefore a two-fold increase in the price of oil since then must give them some comfort.

"They will want to avoid a rapid increase in oil prices whilst the recovery is fragile as it might well tip the world's economies back into recession," Seabury said.

© 2010 AFP

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