Oil slid 4 percent to below $71 per barrel on Friday as a stronger dollar and data showing additional US job cuts as investors fled from risky assets like commodities. It was the second straight session of steep declines, as oil prices on Thursday posted their biggest one-day fall since July. US crude oil for March delivery fell $2.92 to $70.22 per barrel by 1:56 pm EST (1856 GMT) after reaching a session low of $69.50. US crude on Thursday closed down 5 percent.
London ICE Brent for March fell $3.39 to $68.74. The dollar index, a measure of the greenback's performance against six major currencies, jumped as concern deepened about fiscal problems in south European countries. "The dollar remains the focal point for both the equity and commodity markets as Greece's debt issues put pressure on the Eurozone," Chris Jarvis, senior analyst, Caprock Risk Management, Hampton Falls, New Hampshire.
"We believe near-term dollar strength is likely, which will leave stocks and commodities in correction mode with crude oil leading the way." A stronger US dollar makes commodities, like oil, more expensive for those holding alternative currencies. US jobs data, which showed US employers unexpectedly cut 20,000 in January, but the unemployment rate surprisingly fell to a five-month low of 9.7 percent.
"Today's US jobs report for the month of January provided a significant surprise to the downside, with a drop in the number of US jobs in January by 20,000," said Jason Schenker, president, Prestige Economics, LLC, Austin, Texas. "The big truth of today's report is not that the job market improved, which it did not. The big truth is that with downward revisions to previous employment reports, there were more jobs lost than had previously estimated," he said.
Other commodities also slid, with gold hitting fresh a three-month low and other metals also down sharply. Wall street also fell on concerns about sovereign debt troubles in the erozone. Oil fell 5 percent on Thursday, its steepest daily drop since July and the fifth-largest trading volumes ever on the New York Mercantile Exchange (NYMEX) as investors dumped risky assets.
Rumours over the health of an unidentified hedge fund were also cited as a negative factor on Thursday as the oil market fell. On Friday, oil-focused hedge fund BlueGold denied what it said were false rumours about its continuing operations and said it was not behind oil price volatility in recent days. Oil is now about 50 percent of its record above $147 in July 2008, down from a 15-month high close at $84 on January 11.
Dealers said Thursday they thought the sell-off was linked to a hedge fund unloading a big position. A sudden rush of volume in front-month NYMEX crude futures trading during the final moments of open-outcry trading on Wednesday was followed on Thursday by the fifth-highest trading volume on record for the contract at nearly 500,000 lots. The statement from BlueGold helped calm nerves that traders said had been frayed by the sharp slide in prices.
BlueGold Chief Executive Officer Dennis Crema told Reuters he "utterly and completely" denied his company was in any way responsible for the recent volatility in crude oil prices. "We ... deny any false rumours surrounding BlueGold's continuing operations," he added. "Business continues as usual."
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