US crude oil prices reversed from early gains and fell on Friday in volatile trading, dropping below $88 a barrel as the dollar gained strength against the euro and Wall Street equities fell. Markets were buffeted as investors digested a government report showing the US unemployment rate declined but that fewer jobs than expected were added in December.
Brent crude had steeper losses as a Thursday fire halted production at a Canadian Natural Resources Ltd oil sands facility in Alberta, one factor that prompted investors to unwind positions that had sent Brent's premium to US crude soaring. US oil prices retreated from a 27-month high above $92 which was set on Monday and were on track to end the week about 4 percent lower. That would be the biggest weekly percentage loss since mid-August.
US crude oil for February delivery fell 88 cents, or 1.0 percent, to $87.50 a barrel at 1:56 pm EST (1856 GMT), trading as low as $87.25, its lowest since hitting $87.01 on December 17. Friday's intraday peak was $89.48. In London, ICE Brent crude for February fell $1.557 to $92.97 a barrel, trading from $92.59 to $94.58. The spread between Brent and US crude remained above $5 a barrel. The euro fell to a near four-month low against the dollar, hit by uncertainty about the use of eurozone bonds of peripheral countries as collateral for bank loans and as US employment data supported a stronger outlook for the dollar than the euro.
Like oil prices, the dollar seesawed on Friday and initially gave up gains against the euro following the US jobs data before recovering. The US government's December jobs report showed nonfarm payrolls rose 103,000 in December, below analysts' forecasts for 175,000 new jobs, but the unemployment rate fell to 9.4 percent from 9.8 percent in November, its lowest rate in 1-1/2 years.
Oil and equities prices were initially supported by Federal Reserve Chairman Ben Bernanke's cautiously optimistic comments about the economic recovery in testimony before a Senate committee after the jobs report. Bernanke's gave his first testimony to Congress on the economy since the Fed launched a controversial plan to buy an additional $600 billion in government bonds.
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