Crude-oil futures settled higher Thursday as the dollar tumbled and concerns grew about the strength of the U.S. recovery ahead of Friday's jobs data.
Investors have become increasingly worried that economic data are signalling a weaker outlook in the U.S., the world's largest oil consumer. But on Thursday, oil gained despite these concerns after the dollar fell sharply against the yen, the euro and other major currencies. Crude-oil is denominated in dollars, so a sharp fall in the dollar makes oil cheaper for buyers overseas using other currencies.
"The main story is the dramatic weakness in the dollar," said Tariq Zahir, managing member of oil-trading firm Tyche Capital Advisors.
Light, sweet crude for July delivery settled $1.02, or 1.1%, higher at $94.76 a barrel on the New York Mercantile Exchange, the highest since May 28.
Brent crude on the ICE Futures Europe settled 57 cents higher at $103.61 a barrel.
The euro was recently trading at $1.3244, up 1.2% from Wednesday, while the ICE dollar index, a measure of the dollar against a basket of currencies was down 1.3%. The dollar also fell to its lowest level against the yen since April 16.
The swings in oil, currency and stock markets Thursday come a day ahead of the May U.S. nonfarm payrolls report. The jobs report from the Labor Department is one of the most closely watched indicators of the health of the domestic economy, and after a weak report on weekly jobless claims early Thursday, investors are bracing for a volatile session.
Economists expect the Labor Department to report that the U.S. economy created a seasonally adjusted 169,000 jobs in May.
The market has paid close attention to jobs data throughout the economic recovery. Higher employment would likely mean more drivers on the roads and rising energy use by businesses.
But some market watchers have said that declines in unemployment could put pressure on oil prices as it may prompt the Federal Reserve to curtail its bond-buying program.
"The expectations and impact of tomorrow's employment report are much less predictable than they normally are," said Jason Schenker, president of Prestige Economics. "A good report could be bad for equity and commodity markets."
Front-month July reformulated gasoline blendstock, or RBOB, settled 2.79 cents higher at $2.8509 a gallon. July ULSD heating oil settled 1.60 cents higher at $2.8714 a gallon.
Copyright (c) 2012 Dow Jones & Company, Inc.
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